Why so much hangs on the Fed’s choice of words

Dan Gorenstein Mar 18, 2015
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Why so much hangs on the Fed’s choice of words

Dan Gorenstein Mar 18, 2015
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It’s that time again, the Federal Reserve is meeting later today, and once again many will spend their time parsing the Fed’s words for any hint that an interest rate is coming.

If rates go up, some economists think there will be a land rush to scoop up homes to lock in low interest rates.

The only problem says with that theory says Sterne Agee Chief Economist Lindsey Piegza is that even with today’s sweet rates, prices are too high for too many.

“If we don’t see the wage and income growth needed to fuel the demand, then we will continue to see a sluggish housing market,” she says.

Even though higher interest rates would mean more homes are out of reach. Zillow economist Stan Humphries says he’d welcome higher rates.

“Home buyers for too long have been looking at the home market through this distorted lens at very low rates which is leading them to bid up prices in a lot of metros and instead they should be looking at home prices through a clearer lens so they get an accurate read on how expensive homes are,” he says.

Humphries says new rates would suggest the Fed sees a strengthening economy.

One where more people have money in their pocket, which Humphries says is what the housing market really needs.

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