DES MOINES, Iowa -- "Today the Federal Open Market Committee decided to raise the target range for the federal funds rate by one quarter percentage point, bringing it to one half to three quarters percent" (from a range of 0.25 to 0.5 percent to a range of 0.5 to 0.75 percent) said Federal Reserve Chairwoman Janet Yellen. In announcing the interest rate increase, Yellen cited the considerable progress the economy has made.
"We`ve been bracing our clients for this conversation," said Zac Bales-Henry, Broker Associate with Coldwell Banker. The announcement did not surprise realtors like Bales-Henry; he and his clients have been expecting the rate hike for a long time. "A lot of people were trying to rush to...purchase houses and try to get the rates locked in before all of this went down, so there definitely was a quick rush near the end of the year," said Bales-Henry. "Usually, you see things kind of dip down near November, December; that wasn`t the case this year around," he said.
For some prospective home buyers who didn't heed the repeated warnings of their realtors, the cost of waiting too long to lock down an interest rate before the Fed's rate hike may mean that they've priced themselves out of an affordable deal. "Typically...in the Des Moines metro area, the average sale price is around $175,000 to $200,000, so it does make a difference, because usually in that price range, dollars and cents get a little more tight," said Bales-Henry.
"People can`t lock in at the rate that was yesterday or the day before that or the day before that...but whether rates stay up is anybody`s guess and if I could tell you for sure I`d be making a heck of a lot more money than I am right now," said Matthew Carmody, Loan Officer with Gershman Mortgage. Lenders like Carmody say it's not just about the Federal Reserve though; he pays close attention to the fluctuation of ten year treasury bonds, and says there are still other factors to consider. "The thing I look at is when you talk to borrowers and you find a lot of people is they`re bumping up against their debt to income ceiling and it`s not because rates were low, it`s because prices have went up and everything is dictated by supply and demand and when money was easy to borrow and it was cheap, then it drove up those prices," said Carmody.