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The rate hike.

Well, it finally happened. The Federal Reserve's Federal Open Market Committee (FOMC) finally replaced rhetoric with action on Dec. 16 when it told the public it would actually begin raising interest rates. And while I wouldn't say it was a non-event, let's just say it was widely anticipated.

Mike Fratantoni, chief economist for the Mortgage Bankers Association (MBA), issued a statement the day the Fed said it would start raising the Federal Funds Rate. It basically says that MBA had already baked a rate hike into its 2016 forecast (with the implication being, what took you so long?).

Here's how Fratantoni put it: "MBA has been projecting a rate increase all year and we have factored rising mortgage rates into our 2016 mortgage finance forecast. Due to the strength of the economy, we still project 10 percent growth in the [home] purchase market in 2016, despite gradually increasing rates."

As many economic commentators have pointed out, the rate hike comes because the economy has shown steady signs of strength. So the small, bitter pill of a rate hike comes against the backdrop of a lot of otherwise good news about the economy. Fratantoni underscored that point: "Today's vote signaled confidence in the future growth of the economy. The unemployment rate is at 5 percent, employment is growing, and core [Consumer Price Index] inflation is running at 2 percent. By any measure, the economy is close to meeting the Fed's targets and it is time to raise rates above zero."

Fratantoni and his team of MBA economists fill this month's issue with their in-depth outlooks for both the residential and commercial/multifamily real estate markets. In the opening article, titled "Miles to Go," Lynn Fisher, Joel Kan and Fratantoni summarize the overall 2016 outlook for the economy and for the housing market. Solid demographics and decent job growth underpin their mostly optimistic outlook.

Jamie Woodwell, MBA vice president of commercial real estate research, tackles the outlook for the commercial/multifamily market in his article titled "Weather Eye." His basic message is that things have been so good for so long that it's hard to believe the good times can continue to roll in 2016. But then he concludes there's still plenty of evidence to support the view there are more good times ahead for the sector.

All in all, this issue offers little in the way of troubling news for domestic real estate markets. But being economists, all of our authors caution about that off-the-wall, unanticipated global development that renders all their forecasts moot. Let's hope that doesn't happen. Happy New Year!

Janet Reilley Hewitt

Editor in Chief

In February ... We explore the tough new regulatory environment for servicing, the changing value of servicing rights and the high-stakes fair lending enforcement landscape.

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Title Annotation:FOCUS
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Date:Jan 1, 2016
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