FED Decides to leave rates alone….for now. 

The Federal Reserve Bank’s Open Market Committee met earlier this week, and as expected, they did not increase interest rates.  During last month’s meeting (July), they announced that 2018 would end with at least 4 collective rate increases, which now means we can certainly expect more increases in the last quarter of this calendar year.
Some language from the meeting notes included:

“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.”

“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.”

What is all of this saying and how does it affect San Francisco real estate and would-be buyers?  Basically, the economy is not just strong, but RIPPING according to the Fed’s assessment.  The job market is strong and continuing to stay that way (especially here in the Bay Area).  Inflation remains in check (although some of my good friends here in the city that are much smarter than I am would disagree!), and there appear to be no signs ahead of a slow down.  In San Francisco, that means confidence in this particular segment of the local economy (Real Estate) will remain strong and inventory is still tight, so prices will be up.  Mortgage rates are roughly 1/2 pt higher than they were at this time last year, but it is not hurting affordability they way some would have expected.  ARM products and interest rate buy downs are great ways to “hedge” your purchase strategy.  For more info on this, email me.
One last note – the committee did leave itself some wiggle room in case the economy changes direction and slows down.  If the job market stalls out, the stock market loses steam, demand for real estate softens, etc. then the expected rate hike in Q4 may not come to fruition.
It will be an interesting last quarter for 2018, no doubt, so we will watch closely and see what happens and how it will impact us here in San Francsico.  Stay tuned…….