Fed Goes Up Another Quarter Point

So the not so new Fed Chairman Ben Bernanke raises the federal funds rate another quarter point to 5%. So what? The equity markets had this increase already priced in. Sure it raises the prime rate to 8% and makes home equity lines less attractive and has us all paying another two cents more per hundred dollars borrowed. Not a huge deal. Rates are at a five year high, but also not that big of a deal, they've been doing this since it was down at 1% two years ago so I think we've all gotten used to it by now.

The bigger deal is whether the rate keeps rising. Many believe that we may get a pause now for the Fed to survey the landscape so to speak to better determine whether their work over the past couple of years has started to work. Others believe that a pause may not come until we hit 5.25% or 5.5%. The higher we go the less so what it becomes, but everything is cyclical so we work with what we've got.

As for the real estate market, people still move, people always want to buy and the mortgage industry is ever accommodating recently coming out with 50 year mortgages. Does it make sense? Well that depends on who you ask, but these products do help people get into homes and once people get in, they will do all they possibly can to stay in. So whereas investments in real estate, at least residential real estate don't seem to make a whole lot of sense at the moment without a great purpose, primary residence home purchases are likely to stay historically strong.

Just make sure to make the right home choice and don't over buy and you should be well positioned to weather any future interest rate rises.