Since the majority of the market believed the Federal Reserve would increase interest rates this Wednesday, a lot of economists had time to formulate what this news would mean for the economy, and more specifically, the housing market.  

As it stands, effective Dec. 15, FOMC raised the target range for the federal funds rate from 0.5% to 0.75%.

Even though the market already assumed this December increase, it’s what economists believe will happen moving forward that’s most telling.

“The outcomes from today’s Fed meeting held little surprise. The updated ‘dot plot,’ which now implies three expected rate hikes next year compared with two in September, could be viewed as a sign of a more hawkish stance,” said Doug Duncan, chief economist at Fannie Mae.

However, Duncan noted the industry shouldn’t give this projection too much weight, given that, at one point, the dot plot signaled four rate increases in 2016 versus the one that actually materialized.

As far as how this directly impacts housing, Mike Fratantoni, Mortgage Bankers Association chief economist, stated, “Last week, mortgage application volume continued to drop in response to a relatively small increase in mortgage rates. Rates climbed following the election and appear to be up a bit following the Fed’s announcement today.”

As a result of the news, Fratantoni said they have adjusted the forecasted path of interest rates upwards slightly in their December forecast, and expect that refi activity will continue to fall during 2017. 

The MBA also expects that purchase activity will be robust, backed by the strength of the job market.

And looking ahead, Redfin Chief Economist Nela Richardson added that mortgage rates will increase, but not too much.

“Today the Federal Reserve surprised Wall Street by suggesting there would be three rate hikes in 2017 instead of the two that were anticipated by investors,” she said.  

However, she added that this isn’t important to homebuyers. Instead, they care about the Federal Reserve’s continued investment in mortgage securities, which it began purchasing in the aftermath of the housing bust in 2008.

“The Fed’s investment in mortgages helps keep mortgage rates low, and Chair Yellen promised that this buying program would remain in effect a while longer.  As long as the Fed remains a trillion dollar investor in the U.S. mortgage system, a moderate pickup in short-term rates won’t unhinge historically low long-term rates like mortgage rates, and won’t dampen the strong homebuying demand we’ve seen as a result of a strengthening economy,” Richardson said.

The group of homebuyer this could impact the most: first-time homebuyers. Jonathan Smoke, realtor.com’s chief economist, said, “Today’s Fed announcement is going to have the greatest impact on first-time homebuyers as they consider their monthly payment budgets. Rates will likely stay the same until about March so buyers considering a purchase in 2017 may want to consider getting into the market now.”