Last week, homebuyers gave a collective shrug to higher mortgage rates. Not that rates are higher. They’re not. They will be, but house hunters have more important things to worry about. Not so much the Fed. This week, Janet Yellen & Co. will decide whether to raise rates for the first time in almost a decade. Go for it, Madam Chair! Also, the world’s first crowd-sourced skyscraper, and how suburban living is like smoking.
What will the Fed do? It’s a coin toss. What should the Fed do? Raise rates.
A rate hike is like a vote of confidence in the U.S. economy, which is doing pretty well. We’re creating about 212,000 jobs a month, help-wanted ads are at a record high and consumers are spending. Yes, we’re beset by feeble wage growth and labor-market dropouts, but things are better than they were.
Then there’s the rest of the world. The global economy is flirting with recession. Europe, China and Latin America are in deep trouble. The head of the International Monetary Fund has urged the Fed not to rush.
Labor unions and civil rights groups are amping up political pressure to stay the course. “Let our wages grow,” is the group’s mantra.
So even though U.S. economic data all but screams for a rate hike, the odds are only 50-50 for Thursday’s Fed announcement.
The housing market would barely feel a gradual rate hike. But a big, quick jump in borrowing costs could spook markets. For homeowners and buyers, it’s safer for the Fed to start sooner and take small steps. If the bank waits and things go wrong, it could be forced to raise rates too high, too fast.
“This isn’t monetary policy, it’s behavioral economics,” Redfin Chief Economist Nela Richardson said. “They’re causing a lot of anxiety and emotional angst over something that won’t have a big effect if they do it right.”
“It’s time to man up, find some wool socks, lose those cold feet and hike rates.” – Chris Low, chief economist, FTN Financial Networks
“While we think the Fed should hike rates in September (actually let us be clear, they should have hiked rates back in June) we have to remember what we think they should do can differ from what they will do. And in this instance, it would take nothing short of a very uncharacteristic show of courage to lift rates.” – Tom Porcelli, chief economist, RBC Capital Markets
“Raising rates is NOT about ‘telling the market who is boss,’ ‘protecting financiers,’ ‘just getting on with it already,’ or ‘building up ammo for the next crisis.’ The rationale is simple and consistent. The labor market is healing …. Waiting too long to raise rates risks a more aggressive pace of hikes thereafter.” – Neil Dutta, head of economics, Renaissance Macro Research
“The Fed needs to set policy based on where the economy is expected to be 12 to 18 months from now, and there should be a lot less slack. “ – Scott Brown, chief economist, Raymond James & Associates
Bad-guy roundup, yee-hah! The Justice Department said it would go after bad bankers. Ummmm.
Oh, me? My money’s in commercial real estate. The world’s first crowd-funded skyscraper is going up in Bogata, where more than 3,800 Colombians have a collective $170 million stake in the 67-story building.
Cigarettes and suburbs. The Surgeon General says unwalkable neighborhoods might be bad for your health. Bold.
Where exactly is the #$%@! rent too high? Harvard’s Joint Center for Housing Studies maps it out.
Budget brouhaha. Congress has to pass a budget in a couple weeks or the government will shut down again. Un. Cool. Meanwhile, the deficit shrank to $64.4 billion in August, $59 billion smaller than it was a year ago, and tax revenue is up.
Foreclosure update. Sales of bank-owned homes hit a new low, CoreLogic says.
Shameless Plug Dept. What do Brooklyn and Grand Rapids have in common? C’mon, guess.
Questions? Comments? Lorraine.woellert@redfin.com
