Since December of 2008, the Fed has left the Federal Funds Rate at 0%-0.25%. The Federal Funds Rate is, basically, the rate at which other banks can borrow money from the Federal Reserve. The basic concept is that if it costs banks less to borrow money from the Fed, it should allow them to lend more money, at more affordable rates, to the consumer.
So, this rate was dropped in December of 2008 in an attempt to stem the tide of the Great Recession. It worked to some degree, but the real question now is when will it ever rise again? Or, will it ever rise again?
Rick Reider, a Managing Director for BlackRock, wrote the article "Jobs Report Could Be a Game-Changer for the Fed" and he reiterated what everyone has been talking about every time the economy looks like it has its legs again. That is...the Fed has to raise rates now! Right? But then he goes on to say that with overall inflation in check and some still very core problems with the economy and who it is NOT helping (mainly the low-income wage earner...and much of the middle-class) then maybe they just keep it at ZERO. Isn't 6 years enough to call it the New Normal? What will happen once the Fed says, yes, let's raise the rate? The economy will have to be running more than its current walk, and for a more sustained time so that consumers can bear the burden of higher borrowing costs.
Bottom line...it may be the New Normal, but it is bound to change and when it does...it will cost more to buy a home. Don't wait! Call me today for a confidential review of your real estate goals.
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