The following statement is NAR Chief Economist Lawrence Yun’s reaction to the Federal Reserve’s decision today to raise short-term interest rates, as well as what it means for the economy and housing in 2018:
“There will be juice added to the economy in the months ahead as a result of the expected passage of a massive tax cut. It remains to be seen whether the effects are long-lasting or just for a short period of time.
However, with the unemployment rate already at a low of around 4 percent, there is not much room to go further down. That means inflationary pressure will slowly develop. That is why the Federal Reserve today raised the short-term interest rates and will likely do so three more times in 2018. The longer-term interest rates, like the 30-year fixed mortgages rate, will therefore be nudged higher in 2018. Economic stimulus will help with job creation and housing demand, but higher interest rates threaten to cut into housing affordability next year.”