Interest Rate Hikes likliehood is low, Economic Growth is expected in 2nd half of 2016, Low mortgage rates thru 2016

August 19, 2016

Friday – August 19

A number of Fed members spoke yesterday with various conflicting statements surrounding the timing of interest rate hikes. San Francisco Fed President Williams (non-voter) said the central bank should raise rates sooner rather than later. On the other hand, Dallas Fed President Kaplan (non-voter) said that the Fed had limited room to maneuver in hiking rates given the U.S. economy’s sluggish momentum. In addition, the St. Louis Fed President Bullard (voter) said on Wednesday that he sees a single rate hike in the next two years. The current chance of a hike to the short-term Fed Funds Rate is just 15% at the September Fed meeting.

Government sponsored entity and mortgage provider Fannie Mae released its August 2016 Economic and Housing Outlook this week revealing that economic growth is expected to rebound in the second half of 2016. Gross Domestic product, or economic growth, is expected at 1.8% for all of 2016, which is above the 0.8% and 1.1% recorded in the first two quarters of 2016, though below the 2.5% that is seem in a normal economic environment. Fannie Mae went on to say that it expects the Federal Reserve will hold the Fed Funds Rate steady this year at current level given global uncertainties and anemic output growth.

Fannie Mae went on to say that homebuyers will benefit from improving job and wage growth, more favorable lending standards, and continued low mortgage rates through the rest of the year. It forecasts that the 30-year fixed-rate mortgage rate projected to average 3.40%. In addition, the homeownership rate dropped to below 63% in the second quarter, but Fannie Mae is seeing some tentative signs of older Millennials moving toward homeownership.