As many of you may have heard, the Fed (Federal Open Market Committee or FOMC) met on Sep 17 to consider raising the Federal Funds rate from 0% to .25%. The Federal Funds rate is the interest rate that banks can borrow funds from the Federal Reserve and is an [indirect] determinant in the interest rate that consumers are charged on conventional mortgages.
The Committee voted 9-1 in favor of not raising the rate at this time due to the job market still on the recovery and developments abroad (i.e. the Chinese economy slowing down). The next meetings are scheduled for the end of October and again in mid December; many economists expect a .25% bump in the near future.
In early Sep, the rate on the 30-year fixed mortgage was under 4.00% but crept up to about 4.125% toward the middle of the month in anticipation that the FMOC may raise rates. Following the announcement, the rates began to fall almost immediately and are now back under 4.00%.
What does this mean for home buyers in Key West and for Key West real estate? Probably less than in other parts of Florida and the country. Given the demographics of Key West where many real estate purchases are second homes or investment properties, many real estate purchases are cash. YTD, 227 of the 492 residential real estate purchases (over over 46%) were cash purchases involving no financing.
However, stay tuned. There are two more FOMC meetings scheduled for this year…