Industry optimistic as Fed rates unchanged.

The Federal Reserve's decision to keep interest rates steady have created extended optimism likely to last the year.

A new report that suggests inflation is a non-issue furthered investor confidence.

"I don't see that rates are going to move up again until the first quarter of 2005," said Hugh Finnegan, a real estate attorney with Sullivan and Worcester, a corporate law firm with offices in New York, Boston and Washington, D.C.

Factors in the steady rates include the upcoming presidential election.

"It's certainly a factor," Finnegan said, "along with the need for the economy to get stronger soon"

But continuing to establish the Federal Reserve as an objective presence is a priority, he added.

"I think the Fed doesn't want to be seen as politicizing the process," Finnegan said. "If they start to raise rates and it further weakens the economy, it could be seen as trying to help the Democrats reinforce the belief that Bush doesn't have a handle on the economy."

The continued low interest rates also might allow real estate values to grow even more, Finnegan said. But when the rates eventually go up, high floating rate mortgages could still eventually be in danger of delinquency, he added.

"I don't want to overstate that point, but I think, in the short term, that's not likely because rates are so low," he added.

Also, "As a general rule, underwriting has been much more strict than it was 15 years or so (ago)," Finnegan said.

However, Finnegan conceded it was "possible" that access to capital could increase the risk of delinquency. Marc Goloven, a senior regional economist for J.P. Morgan Chase, said the Fed's decision heightened hopes in the bond markets for the Federal Reserve to keep interest rates down "for much of this year."

"As a consequence, we have recently seen mortgage interest rates slide to record lows once again," Goloven said. "It is unambiguously positive for the real estate market as we look to the next three to six months."

Despite a positive economic outlook by many, Goloven said the Fed recognized that "this was not the time to raise interest rates," with significant shortages causing price run-ups in some markets, such as energy and scrap metals, and commodities such as copper.

Goloven predicted interest rates will remain low at least through the election.

"I think they're waiting to see an upside (before raising interest rates)," Goloven said. He predicted the country would not see heightened rates "before the labor market improves substantially and starts to chip away substantially at the unemployment rate."

Nevertheless, Goloven added, "Deciding to choose an adjustable rate mortgage against a fixed rate mortgage would have worked in favor of the buyer."

When the rates go back up, those with adjustable rate mortgages probably will not have cause for worry. "With most adjustable rate mortgages, they always have the option of converting to a fixed-rate mortgage." Goloven said.

"I don't think it would cause undue alarm. And at this juncture, when it seems the interest rate climate is going to remain extended toward the borrower, choosing an adjustable rate mortgage does seem to be a good choice--at least for the foreseeable future."