Home buyers shouldn't fear pending hike in federal funds rate

The Federal Reserve Board seems ready to raise interest rates. Ironically, it could be the tonic to keep the nation's housing market from falling ill.

Q. I keep hearing reports on the radio and seeing on TV that the Federal Reserve Board is going to raise interest rates in November. Why would the group do this, considering that the housing market is still strong and the overall economy seems to be getting better? It makes no sense!

A. Actually, it makes perfect sense. The increase probably won't come in November, but rather after the Fed's meeting in December.

The Federal Reserve Board is made of seven economists who are nominated for their respective positions by the president and then must be confirmed by the U.S. Senate. Their main job is to raise or lower the prime rate, which is the rate at which one bank charges another for an overnight loan to meet federally set banking standards.

The anticipated 0.25 percent increase in the prime rate probably won't create an immediate rise in home-loan rates, and it might even push them down further. A prime-rate hike would curb spending, keep the economy from overheating and thus keep inflation in check. That's what happened when the Fed raised rates last December: Most lenders promptly cut their rates on new 30-year mortgages because they felt confident that the prospect of an even bigger, longer-term increase in rates and inflation had been put to bed for the next several years.

Real estate trivia: A precursor of today's Federal Reserve Board was the First Bank of the United States, created by Congress in 1791. Farmers didn't like the idea of having the government and private lenders essentially controlling the economy, so the FBUS was disbanded by lawmakers 20 years later - by a single vote.

Q. I bought a new water heater about five years ago. I recently received a postcard from the company that installed the heater stating it's time to replace the water tank's "anode rod" to help protect the heater's expected life span. What does an anode rod do? Does it really need to be replaced, or is the company just trying to make more money from us?

A. No, the company that installed your water heater isn't trying to hit you with an unneeded maintenance bill.

Most homeowners, like you, don't know their water heater has an anode rod, because it's hidden on the inside of the tank rather than on the tank's exterior. Nonetheless, the rod is a key component of a water heater's system and should be replaced every five years or so to prolong the tank's life.

The inside of most steel water heater tanks are lined with a thin sheet of glass to help prevent the steel from gradually being eroded by the sediment, minerals or other microscopic stuff that is typically found in public and private water systems, alike. The long anode rod, which usually is made of magnesium or aluminum, attracts these corrosive elements so they don't eat away at the tank itself - sort of like the way a lightning rod attracts thunderbolts so they don't harm the house that's underneath.

After a while, though, the anode rod becomes so corroded it can no longer do its all-important job. If that happens, the corrosive material in the water will attack the tank itself: Cracks and leaks will develop, and the entire water-heating system may then need to be replaced.

Experts at The Family Handyman Magazine (www.familyhandyman.com) note that paying to have the anode rod replaced before it fails is much cheaper than being forced to buy a new water heater - and even could double the heater's expected life span.

Q. My wife and I have decided to put our home up for sale. Problem is, she is in the Navy and will deploy to Saudi Arabia in two weeks. Since the home is in both of our names, will the fact that she won't be around to sign a sales contract and other documents cause any problems?

A. Probably not. Any sales-related problems likely can be avoided if your wife signs a basic power-of-attorney form now, naming you as her attorney-in-fact. The forms are fairly common and often are used by people who have a spouse in the military or a spouse whose private-sector job requires a lot of traveling.

By signing the document, your wife will give you the power to accept an offer and sign all the important papers on her behalf. The form may need to be signed in front of a licensed notary or at least a third-person eyewitness.

Your real estate agent or a local real estate attorney can provide you with the proper power-of-attorney form and more information about what needs to be done to make the document and the eventual sale of your home legally enforceable.

Thank you to your wife for her military service, and for your own efforts to support her.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2016, Cowles Syndicate Inc.