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Fed rate hike: What it means for consumers

January 1, 2017
Financial markets have sent a forceful message that the era of super-low interest rates is coming to a close.

The Federal Reserve’s decision Wednesday to raise its benchmark short-term interest rate will slowly push up rates on everything from mortgages and credit cards to savings accounts. 

The Fed increased its federal funds rate by 0.25 percentage points. It was only the second increase in more than a decade. Chairwoman Janet L. Yellen said at a press conference that the economy had shown enough improvement in the last year to warrant higher increases and projected three more rate hikes in 2017.

Here’s how the rate hikes will affect your pocketbook.

Mortgage rates

Mortgage rates are already historically low and the Fed’s short-term rate bump — which indirectly affects mortgage rates — is not likely to make a big difference in the next few months. But, subsequent hikes by the Fed in 2017 could start to really add to the cost of a home. 

Zillow and other industry watchers say mortgage rate increases have more of an impact in costly home markets, like San Diego County. 

Rates have already gone up since president-elect Donald Trump’s victory.

Since the day before the election, the cost of a typical San Diego County home increased by $50,400 over the course of a 30-year fixed rate mortgage with 20 percent down. 

The median home price in the county, $507,500, hit its highest point in a decade in Quick read more or view full article October. Mortgage rates were 3.59 percent the day before president-elect Donald Trump’s victory, rising to 4.19 percent Wednesday, said Mortgage Daily News.

Mortgage rates typically track the yield on the U.S. 10-year Treasury. That yield has risen sharply since the election as investors take money out of bonds and put it in the stock market. However, the bond market could still change course as investors become less bullish on stocks. 

Erin Lantz, vice president of mortgages for Zillow, said coastal California will feel the impact more than, for instance, much of the Midwest. 

“Those higher price markets are where even moderate increases in rates can be felt more significantly,” she said. 

Lantz said higher interest rates could slow home price increases, but it is not likely prices will go down. She stressed interest rates were still at historic lows and there does not seem to be any drop in purchase loan requests on Zillow.

However, subsequent rate increases could make more of a dent. 

Lawrence Yun, chief economist for the National Association of Realtors, predicted Wednesday after the Fed announcements that the mortgage rate would be in the 4.5 to 5 percent range for a 30-year fixed rate mortgage at this time next year.

Randy Goodman, CEO of Accretive Investments, said at a real estate conference last week at the University of San Diego that even though interest rates have an effect on San Diegans, there are non-local buyers who can prop up the market.

He identified foreign buyers and so-called "baby chasers," parents who move across the nation to be with adult children who recently had kids of their own, as people ready to pay higher rates. 

Auto loans

Current car owners paying off a fixed-rate loan will not be affected by any rate increase, but new shoppers looking to buy could pay more — but not much.

The average interest rate for a new car was around 4.26 percent in early December and 4.79 percent for a used car, said Bankrate, a financial website that tracks loan rates.

Greg McBride, chief financial analyst for Bankrate, said people looking to purchase a car shouldn’t lose sleep over interest rate changes. 

“The difference of a 0.25 percentage point for somebody looking to borrow $25,000 is $3 a month,” he said in a Facebook video. “So, nobody is going to have to downsize from the SUV to a compact.”

More Fed increases next year, though, would make these loans more costly. While auto loans are not a huge part of the economic puzzle, Lantz said increases in various parts of the economy mean less disposable income for basic items, and people could put off big purchases.

Savings accounts and CDs

If you like to save money, you’re happy to see any rise in interest rates. But don’t get too excited because Wednesday’s move will have a marginal impact on your nest egg.

Rates on many savings products are still in the basement — down nearly 6 percent since 1990. Consumers are still lucky to find a savings account with 1 percent rates.

Savings accounts and certificates of deposit, or CDs, benefit from high yields and could become more of a factor if the Fed continues to raise rates. 

“If this signals the beginning of more rate hikes to come, then I think you will begin to see meaningful increases in the yields people are earning,” said Claes Bell, Bankrate researcher. 

Money market accounts, a subset of savings accounts, have historically performed much better. The yearly yield was 5.98 percent in 1990, said Bankrate. By 2000, it was down to 2.07. Today,  the average rate on a money market account is 0.11 percent, with the best rates usually coming from credit unions. Rates in San Diego County range from 0.01 to 0.05 percent, according to Bankrate. 

Credit cards

If you have a credit card with a variable rate or a home equity line of credit, you’ll feel Wednesday’s Fed move pretty quickly.

Average credit card interest rates are about 16.28 percent, while home equity lines are about 4.78 percent, says Bankrate. And banks will pass along that quarter-point increase in the fed funds rate to consumers in a few weeks. So, it will make sense to pay this type of debt off before rates get too high or get into some sort of fixed-rate repayment.

“The cost of carrying that debt every month is going to get heavier and heavier,” Bell said. 

The average San Diego County resident was $26,266 in debt in October, according to credit monitoring company Experian. That can include mortgages, student loans and credit cards.

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Here Are The 10 Best Places To See Colorado’s Stunning Fall Colors

September 27, 2015
 
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In the fall, Colorado is transformed into a natural arena of shimmering colors, with the state’s signature gold Aspen trees serving as the main act. These 10 trip ideas will point you in the direction of shimmering yellows, oranges and reds this September and October.

1. Trail Ridge Road

The highest continuous paved road in North America winds through Rocky Mountain National Park from Estes Park in the east to Grand Lake in the west. With more than eight miles above 11,000 feet and a maximum elevation of 12,183 feet, Trail Ridge Road is an amazing vantage point for leaf peepers and is a favored spot for photographers. The Rocky Mountain Conservancy offers guided hikes and tours and volunteer opportunities in the park.

2. Kebler Pass

Gunnison is home to Kebler Pass, which boasts the largest aspen grove in North America and is one of renowned photographer John Fielder’s favorite places. Ohio Creek Road is a great starting point, as it passes some unique natural landscapes, including a series of ranch buildings marking the abandoned site of Castleton and the spires of “The Castles” — remnants of volcanic ash and mud that erupted from the West Elk Volcano some 30 million years ago.

3. The San Juan Skyway

San Juan Skyway, a breathtaking 236-mile loop through the San Juan Mountains of southwest Colorado, offers visitors an amazing array of fall colors and includes a 70-mile stretch known simply as the Million Dollar Highway.  The Durango & Silverton Narrow Gauge Railroad offers a special Fall Photo Train that coincides with optimal fall foliage. Another unique way to experience Colorado’s fall colors is with Soaring® Tree Top Adventures, home to 27 zip lines that pass by brilliant aspens.

4. Maroon Bells

The iconic Maroon Bells, two towering 14,000-foot mountains nestled in the Maroon Bells-Snowmass Wilderness, are the most photographed peaks in North America. Located in the 2.3-million-acre White River National Forest, the Maroon Bells tower over numerous hiking trails that offer unbeatable views of golden aspen trees. The area is accessible by car, however buses run daily mid-June through Labor Day and on weekends Labor Day through early October from the Aspen Highlands.

5. Western Slope Colors

Colorado’s Western Slope is home to the Grand Mesa, the world’s largest flat top mountain, and Colorado wine country. In addition to the reds, whites and rosés made in Grand Junction and Palisade, fall brings with it glorious colors. Powderhorn Mountain Resort’s vibrant scrub oaks contrast with golden shimmering aspens along the Grand Mesa Scenic and Historic Byway.

6. Buffalo Pass

This dirt road just west of Steamboat Springs, is lined with rows of glowing aspen groves. The pass winds eight miles up toward the Continental Divide and Summit Lake, offering stunning views of the surrounding foliage. As the fall colors become more robust, locals recommend a hike to the pristine Zirkel Wilderness Area’s Three Island Lake Trail, which takes hikers through coniferous forests and high meadows, past glacial lakes and vistas. The 6.1-mile (round trip) trail is moderate in difficulty.

7. La Veta Pass

Peaking at an altitude of more than 9,400 feet, the La Veta Pass on U.S. Route 160 in southern Colorado (west of the town of La Veta) is one of the most scenic drives in the state during the fall season. Gold aspen trees mixed with dark green pines line the pass, while the magnificent Spanish Peaks and Sangre de Cristo Mountains tower over the foliage of the San Luis Valley. The Rio Grande Scenic Railroad (May through October) passes through mountain meadows, canyons and colorful foothills otherwise inaccessible by cars.

8. Free Gondola Ride

The Telluride Free Gondola is one of the most popular ways to view Telluride’s amazing fall colors. The aerial views include the town of Telluride, its box canyon and colorful valleys lined with aspens and evergreens. For yet another way to see Telluride’s foliage, several trailheads are located right in town. Locals suggest the Jud Wiebe Trail, a three-mile loop that winds through large aspen groves and passes by Comet Falls.

9. Dallas Divide

Colorado Hwy. 62 over the Dallas Divide represents an epic fall Colorado drive. Starting near Ridgway, visitors can get an amazing view of Mount Sneffels, one of Colorado’s 58 14ers, and the expansive Sneffels Wilderness Area, which offers several hiking trails for those wishing to venture out further. The route eventually connects with Hwy. 45 and Lizard Head Pass, which offers views of Wilson Peak, the very mountain that inspired the iconic Coors logo. Read about other famous Colorado mountains.

10. Front Range Foliage

Peak to Peak Scenic and Historic Byway is Colorado’s oldest, having been established in 1918. The byway starts in Boulder and offers unmatched views of the Continental Divide and its dramatic fall colors. Though the byway is less than 60 miles in length, there are numerous stop off points along the route, including Rocky Mountain National Park, Golden Gate Canyon State Park, the Arapaho and Roosevelt National Forests, and the Indian Peaks Wilderness Area, all of which offer their own unique vantage points for leaf peepers.

 
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