By Gregory J. Wilcox. Los Angeles Daily News
Posted: 12/18/14, 5:06 PM PST | Updated: on 12/18/2014
This week the Federal Reserve Board said it will be “patient” when it comes to raising interest rates.
That will likely help a pretty sick patient — the region’s anemic housing market.
And rates, while expected to go up, should stay low well into next year, which would bode well for housing markets across the nation next spring, said Keith Gumbinger, vice president of HSH.com. a Riverdale, New Jersey-based rate tracker and publisher of mortgage and consumer loan information.
“The Fed is expected to begin raising short terms rates at some point in the year but its hard to predict at what point,” he said.
He’ll hazard a guess, though.
It should start about the middle of 2015.
“At the moment, our best guess is that the Fed will begin liftoff with the June 16 to 17 meeting (or) possibly July 28 to 29,” Gumbinger said in his forecast.
Rates could even drop early in the year if the central banks overseas act to prop up softening economies.
“Steps by those banks to lower rates pushes in dollars about as fast as it can and pulls mortgage rates down with it,” Gumbinger said.
While the forecast calls for
rates to increase, it won’t be by much. In the latest weekly rate survey HSH had the 30-year-fixed mortgage averaging 3.96 percent. The peak this year was 4.64 percent the first week of January.
Rising rates are not necessarily a bad thing, either.
“It’s all kind of good news,” he said. “If rates firm up that could come on the continuation of a growing economy. But we’re projecting they don’t get much higher than this year’s peak, which you could rank among the best of many decades.”
And more evidence of a healthy economy came Thursday when the Conference Board reported that its Leading Economic Index rose 0.6 percent in November, the third consecutive monthly increase. The index is a gauge of the nation’s future economic health.
“Widespread and persistent gains in the LEI point to strong underlying conditions in the U.S. economic expansion,” Ataman Ozyildirim, an economist at The Conference Board, said in a statement.
But forecasts are always a look into a sometimes foggy future, especially those predicting interest rate movement. Last year’s forecast offers a good example.
“This year was a shocker for most folks from a forecast perspective,” Gumbinger said. “The expectation was higher rates by this time and we’re 180 degrees from that. Rates are lower than they were at the beginning of the year.”