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THE FEDERAL RESERVE JUST RAISED RATES
Now that the Federal Reserve is beginning to raise rates, savings accounts will ONCE AGAIN start to pay you a respectable amount of interest. For example, Synchrony Bank just raised their CD Rates to 1%…Nationwide is gearing up to offer 2.5% to their customers…and, many more are expected to follow.
The Stock Market:
Recent data just found that “the S&P 500 has ONLY HAD TWO losing years since 1990 when the Fed was raising interest rates: a 9% decline in 2000 and a 4% drop in 2018.” and….even though it seems like a direct correlation that high interest rates are automatically BAD….it’s not so clear cut.
Since the 1960’s…even throughout rate increases and decreases…the stock market has continued to trend upwards. If we then taken an even closer look since 2017…we can see that, throughout several rate hikes…the market defied the odds…and kept going up!
The Financial Samurai also found that The SP500 has, on average, gained 20% in a rising interest rate period since 1971 – which, can often span over several years. He also says, in order for that to be true…the Federal Reserve must raise rates SLOWLY, and effectively communicate their intentions to the market so investors don’t panic…which, so far, in 2022…they’ve done that.
Home Real Estate Prices:
If we look back historically, we can see that, since 1945 – housing prices continued climbing, right alongside interest rates. After that, rates dropped…and home prices continued to climb even further. It was also found that, OVERALL…a change in interest rates hasn’t substantially affected housing values on a large scale…meaning that…MOST LIKELY – there are other factors that have an EVEN BIGGER impact on prices.
Robert Shiller himself, king of the Shiller Price Index…was quoted as saying: “There is not a tight fit at all between the two: high mortgage rates do not translate automatically into low home prices.”
All of that is to say that – even though higher interest rates DIRECTLY impact home affordability – other factors, like local market conditions, demand, inventory, inflation, tax deductions, population changes, new construction, and the overall health of the economy play just as big of a factor…so, rising rates ALONE won’t do enough to cause prices to decline.
The Cost Of Debt:
Revolving balances have what’s known as a “variable interest rate,” meaning – their interest payment, in some part, correlated to the prime rate, which is influenced by the federal reserve. When that interest rate goes UP – credit cards charge MORE as a result…and, one report warns that your interest rate may begin to go up as soon as now.
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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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