Interest rates have been driving the housing recovery, as well as the economic recovery in the United States since the housing market dropped out in 2008. The Fed has kept interest rates at zero for approximately 8 years which has been attractive for both home buyers, new home buyers, and people looking to refinance their mortgages.
As the U.S. economy has recovered at a very gradual, yet very steady pace, the Federal Reserve, called The Fed, has, within the last year, started to gradually increase the interest rates, once in December, 2016, again in March and then in June, 2017. During the last meeting of The Fed, October 31st and November 1st, during a two-day meeting in Washington, kept the interest rate the same. This could be because a new pick for The Fed chair was expected on Thursday. Rates have stayed within the 1% and 1.25% range, with a rate increase expected in December.
New picks for the chair for the Federal Reserve include the current chair, Janet Yellen, and Jerome Powell, a Fed governor and John Taylor, an economist at Stanford University.
The economy is said to be strong enough to handle another rate increase, especially with the job growth and recovery due to the hurricanes in both Texas and Florida and the wildfires, which have increase restoration construction in California. In addition, the United States unemployment rate is the lowest it has been since 2001 at 4.2%, and the job growth has increased for the last 83 out of 84 months.
The December increase in the interest rate will not cause a huge disruption in the home building industry as, even with the rate hikes, mortgage rates are still at historic lows. However, the refinance market has slowed down a great deal once rates rose above 4%.