The Fed, Trump and Home Prices in 2017

The Federal Reserve will most likely raise short term interest rates tomorrow, but don't expect this latest hike to be the last, said Arash Sotoodehnia, chief credit officer of RealtyShares. The increase in long-term treasury rates will put additional upward pressure on mortgage rates, according to Sotoodehnia. Prior to Thanksgiving, 30-year mortgage rates broke through the 4% rate, and he expects them to move higher. Initially borrowers will react to this by shifting to shorter duration hybrid ARMs in Sotoodehnia's view. Over time, however, he expects the rise in mortgage rates to put pressure on house price growth rates. That said, the housing market will not fall too far because the impact of Trump's stimulus - lower taxes and higher government spending - will likely offset the impact of mortgage rates on house prices unless mortgage rates approach 5%, according to Sotoodehnia.