In December, the Federal Reserve made its first and last interest rate hike for 2016, but left the industry with the notion that three more could be on the way for 2017. However, one expert told HousingWire that’s all talk.
Jason Obradovich, New American Funding executive vice president of capital markets, explained that for all its intentions, the Fed probably won’t be raising rates as much as it would like in 2017.
“The Fed has been trying to raise rates for several years in a row and they’ve only done it one time per year, and in December of all months,” Obradovich said in an interview with HousingWire. “They literally waited until the very last moment of each year to raise rates.”
After President-elect Donald Trump took office, interest rates spiked for nine straight weeks, and even hit two-year highs.
The last two weeks, however, brought a change as mortgage rates once again began to drop. Obradovich confirmed that the increase seen after the election would not be the new norm for 2017 as the economy cannot support such constantly-rising rates.
“We might see a tax cut which also could drive up inflation, it could raise rates, but in the long run, I just don’t know if the United States could support higher rates,” he said. “I just don’t know how much higher it really can go than where it is now.”
Not all industry experts agree with Obradovich. OwnAmerica CEO Greg Rand, explained that there is nothing to fear headed into 2017. Federal Reserve Chair Janet Yellen herself sent the dollar soaring to a 14-year high in December as she voiced her own confidence in the U.S. economy.
Nevertheless, Obradovich held to his original sentiments that the economy is not in a place to support three rate hikes in 2017.
“I know they are discussing, and their dot-plot suggests that they’re going to raise rates three times in 2017, I just – unless there’s some massive tax cuts or infrastructure spending or deficit spending by the Trump administration, I just don’t see an environment where they could raise rates three times,” he said.