Behind The Mic With Joe Mathieu: Interest Rates Going Up?
BOSTON (CBS) – The rebounding housing market has a lot to do with the lowest interest rates in generations.
But that could change when the Federal Reserve wraps a 2-day meeting Wednesday afternoon.
Nothing gets me excited like a good Fed meeting. Brings out my inner wonk. And while this can be pretty dry stuff you should pay attention because this it affects all of us.
The Fed has been working for years to keep rates near record lows.
But the cheap money cannot last forever. And with the economy showing improvement many economists think the Fed is about to let rates start rising again.
They’re already going up in the mortgage market.
The concern is that rising rates will derail the recovery which hasn’t been all that strong to begin with.
I’ve been reading some of the notes policy makers use in these meetings. They’re from something called the Beige Book (sounds exciting, right?) and in the Boston chapter the Fed says home prices and demand continue to rise.
Because of low interest rates and low supply.
So what happens when rates start rising?
That’s the big question the Fed is trying to answer. But based on notes in the Beige Book, it seems you’re better off the closer you are to the city.
That’s because the inventory of homes and condos for sale is so low in Boston that demand will likely overwhelm supply even if rates go up.
In fact, the Fed says the supply of homes for sale in the Greater Boston area is among the lowest in the country.
And that, they say, presents its own problem – inflated prices – which threatens to create a whole new bubble.
You can follow Joe on Twitter @JoeMathieuWBZ