The Federal Reserve has recently hiked the short term interest rates. In this video Ron Koenigsberg, CCIM, discusses the forecast for the rest of 2018, and the impact that these interest rate hikes will have on commercial real estate property owners and investors. The Fed Reserve raises rates to combat excessive inflation and lowers them to spur faster economic growth. The Fed’s target rate helps determine rates for mortgages, credit cards, and other means of borrowing/lending. This means it’s important that everyone remains up to date on what this means for real estate investments and owned property.
Please watch the video above for more information and contact us with any questions.
Video Transcript Below:
Hi, I’m Ron Koenigsberg, President of American Investment Properties.
In this month’s video we’ll detail the Federal Reserve’s recent hike on short-term interest rates, the forecast for the duration of 2018 and the impact that increasing rates have on real estate.
Federal Reserve Raised Short-Term Interest Rates
In mid-March new Federal Reserve chairman Jerome Powell raised short-term interest rates for the first time in 2018. The quarter-point rate hike puts the new Federal funds rate at a 1.50%-1.75% target range.
The Fed raises rates to head-off excessive inflation and lowers them to spur faster economic growth.
Considering that the Fed’s target rate helps determine rates for mortgages, credit cards, and other borrowing, as real estate professionals it is important that we continue to stay in-the-know.
Fed Funds Rate Forecast For The Future
With a strengthening economic outlook, this rate hike is just the first for this year with three more increases forecasted for the remaining months 2018. By end of year, forecasted rates will likely rise to 2.25%-2.5%.
The Fed has also raised its projection from two to three hikes for next year as inflation picks up.
Commercial Real Estate and the Federal Reserve Rate Hike
As for the hike impact on real estate, these increases do not affect property owners with a fixed mortgage rate, however, anyone with an adjustable-rate mortgage will find themselves paying more in interest as the rates continue to raise.
As indicated by a reported uptick in mortgage applications in recent months, property investors have been racing to lock in their mortgages in anticipation of the upcoming forecasted rate hikes.
However, despite decreasing affordability, higher interest rates might have a silver lining as it becomes more difficult for financial institutions to sell mortgages the qualifying standards may loosen, enticing new investors.
It is important to note that because real estate is a hard asset with great ability to combat inflation, it is a highly sought after investment during periods of rising rates.
Thanks for watching our video on the recent Fed rate hike and its impact on real estate. I hope you found the information timely and useful.
As always, if you have any questions about the Long Island commercial real estate market please contact us at American Investment Properties.