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Fed raises rate; little worry locally

September 27, 2018

The Federal Reserve on Wednesday raised interest rates for the third time this year : but Fort Wayne area builders and real estate professionals said they don’t foresee much of an impact on their businesses.

“The first thing I’d say is our industry professionals coming into 2018 predicted there could be as many as three bumps in the rate, so our people don’t see it as at all shocking,” said Fort Wayne Realtor Beth Walker of Fairfield Group Realtors. “I don’t think its going to take much out of our market.”

The move by the Fed boosted the benchmark federal funds rate by a quarter point to a target range of 2 percent to 2.25 percent. Officials said their assessment of the economy continued to be upbeat, because growth and job gains have been strong and inflation remains near the government’s 2 percent target.

Walker said while a quarter of a point or even a point increase “sounds like a lot, psychologically” to prospective home buyers, the effect on a home mortgage “doesn’t amount to a lot on the monthly payment.”

The rates are still historically low, she said.

Homebuilders said the impact might be felt a bit more at their level.

Rob Wacker, president of Windsor Homes in Fort Wayne, said hard costs for building a home : construction materials such as lumber and metal : have been going up.

“The interest rates remaining low is the thing that helps offset that to some extent, so people’s borrowing power is huge in whether they buy a new home with us,” he said.

But the impact is double-edged, Wacker said.

A rise may slow things down a bit, “and I think that’s the Fed’s intent,” he said. On the other hand, it might push some undecided prospective buyers off the fence, so they decide to buy now before rates increase again. That could mean a short-term uptick in demand, Wacker said.

Tyler Kees, business development director for Quality Crafted Homes in Fort Wayne, said the builder of upscale custom homes is seeing price increases for materials of about 4 percent this year.

Costs have recently stabilized, he said. But the impact of President Donald Trump’s tariffs, which raise the price of imported lumber and metal, and Hurricane Florence, which raises demand for rebuilding materials, remain to be seen, he added.

“Anytime you see interest rates go up, it usually means the economy is doing good,” Kees said. “We have not seen any lessening of buyer confidence.”

In a change from last month, the Fed’s statement did not describe its rate policy as “accommodative,” which was read as an acknowledgment that rates have moved closer to the level which neither boosts nor holds back the economy. Experts predict another rate hike in December.

After eight hikes since late 2015, the federal funds rate is now at the same point it was in October 2008, before the beginning of the financial collapse. Some have predicted more, if gradual, hikes next year.

Walker said within hours of the announcement, a bank with a local presence sent an email to Realtors touting as a selling point that it would not raise its interest rate on home mortgages anytime soon.

“That’s today,” she said. “Who knows what tomorrow will bring. It’s hard to predict.”

rsalter@jg.net

Bloomberg News contributed to this story.

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