Interest Rates Means Shifts for Real Estate
Since the election of Donald Trump, the economy has taken a turn in new directions. First, stocks have been soaring while bond prices have mostly plunged. This has led to a sharp increase of interest rates including mortgage rates. There does not seem to be one under laying reason why the rates are going up, but multiple factors to consider.
What does this mean? The mortgage interest rates have been extremely low for years after the recession to help the economy get back on its feet – it seems that the economy is getting back on track now! Although it’s hard to say if this economy spike is here to stay, it has had an immediate effect on the rates for now. With the economy going up and interest rates going up, buyers looking for a home will be able to afford less. This means that buyers today might be pressured to buy now and lock in rate before the rates get even higher. A short burst of buying will quickly change if the rates climb further up.
Once the interest rates get high enough to really change the amount a buyer can afford, the market will shift. Once the shift happens it will be a buyers market in the sense that sellers will have to lower their prices in order to attract buyers. The sellers have to lower their prices (serving as a correction in the market place) so that buyers can again afford more even with the interest rates. As you can see, when the economy booms the banks can take more from people getting mortgages and get away with it due to the reasoning people are making more in general with the better economy.
Bottom line, if you are worried the mortgage rates going up it is a good time to buy now and lock in a rate before its gets higher. Or if you are selling, now is the time before the prices are corrected lower for affordability for buyers. Either way, this is just the normal shifting of the markets in an ever-changing economy. Don’t worry but prepare for this change and embrace it the best you can.