If you’ve been listening to the news recently, you’ve probably heard about the recent interest increase from the Federal Reserve. But what, exactly, does that mean for you? As an informed consumer and homeowner, here are a few aspects of the increased interest rate, the economy, and the home building market to keep in mind.
Why did the Federal Reserve vote to increase interest rates?
In December of 2017, the Federal Reserve’s policy committee voted to increase the central bank’s principal interest rate from 1.25% to 1.5%. This is the first of four expected quarter-point hikes over the next year. The increase in interest is part of a natural system by which the Fed mitigates inflation. As the U.S. economy continues to grow, the Fed must parallel the progress with increased interest rates.
While this process is necessary to keep the supply and demand relationship in balance, there has been some concern as to whether the increase has been implemented prematurely. Regardless, in 2008 during the recession, interest rates were near zero. Since then, the interest rate has only increased five times, and it’s still nearly 4% below the pre-recession rate. The increase, coupled with the newly-passed tax-reform bill, signals a growing economy.
What does the tax increase mean for me?
An increase in interest may sound like a bummer, but several positive consequences are tied to a higher interest rate:
- High interest rates signify a stronger dollar.
- High interest rates can attract foreign investors who are looking to yield a high ROI.
- High interest rates increase the buying power of a U.S. dollar in the global economy.
Interest rates are projected to continue increasing over the next couple of years, reaching an estimated rate of 3% by 2020. You can expect an increase in payments for
- Credit cards
- Adjustable-rate mortgages
- Home equity lines of credit
Borrowing money to pay for a large purchase like a car or a home will cost more in the next couple of years as the interest rates continue to climb.
How will the natural disasters of 2017 affect the future housing market?
The natural disasters the United States recently experienced—including the hurricanes in Texas and Florida and the wildfires in California—made 2017 our most expensive year on record. The insurance industry took a massive hit as a result, and the events are already impacting the housing market, especially in disaster-prone areas. Many people are borrowing money to move into new rental homes or rebuild, increasing demand and shrinking inventory. While the full extent of the impact is still uncertain, experts predict that it could affect people throughout the entire country. Home and materials costs are expected to continue to rise.
What does this mean for me as a potential home builder?
If you are interested in building a home in the near future, you may want to act sooner rather than later. As the economy continues to grow, so will the housing market. The cost to purchase land, materials, and services will continue to rise, meaning the overall cost of your project will, too.
The experts at Homes by Brill will guide you through every step of your building project. Regardless of economic conditions, Homes by Brill is Des Moines’ expert in custom home building. With a wide range of capabilities, Homes by Brill will work with you from start to finish, ensuring your dream home becomes a reality. We are proud to work with some of the top vendors in the Des Moines area, and our team is ready to customize every aspect of your home from start to finish.
Why wait for tomorrow when you can do it today? Schedule a consultation with Homes by Brill now!
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