Real estate values and trends depend on a lot of factors. But in the last few years the historically low and then historically high interest rates have caused the biggest shifts in the market.
This is why we have been providing regular blog updates on the market and the impact of interest rates. Understanding the impact of each quarter point change in rates from the Federal Reserve can mean hundreds or thousands of dollars in your bank account.
Today, we’re going to do what we do best. We’re breaking down the Fed’s most recent decision, what that means for real estate, and for you as a potential buyer or seller.
The Fed’s July hike:
After declining to raise rates at their June meeting, the Fed announced a .25% interest rate increase at their July 26 meeting. We saw improvement in inflation this summer—June’s inflation rate was actually a two-year low, which is what allowed that pause in rate hikes—but the Fed decided that more action was necessary to keep inflation trending in the proper direction.
Expert opinion is split on whether there will be one more hike or whether the Fed is done with hikes. Fed chair Jerome Powell said in the post-meeting press release that they’ll make decisions as they go: “We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks.”
How this affects mortgage rates:
While the Fed’s rate hikes do not set mortgage rates, they do influence them. As Bankrate explains, “mortgage lenders and investors closely watch the central bank, and the mortgage market’s attempts to interpret the Fed’s actions affect how much you pay for your home loan.” Mortgage rates have risen slightly since the Fed’s announcement.
With mortgage rates up, it’s important to set yourself up for success if you’re planning to buy or sell in the near future.
What this means for buying:
As a buyer, be aware that inventory is likely to remain tight for a while. Some people are hesitant to sell their homes if they currently have a low-interest mortgage. You’ve probably heard a friend or family member say: “Why would I sell my house when I’m only paying 3%!” Be prepared to move fast when you see a home you want.
You can give yourself an edge by having enough cash for a larger downpayment. This is attractive to sellers, can lessen the effect of high interest rates on your budget, and can help you avoid PMI. Don’t forget that you can get cash for a large downpayment by selling your current home to us at MarketPro Homebuyers.
We can also time the sale of your current home around your new purchase, so that you don’t get stuck paying two mortgages for any amount of time. We are far more flexible than buyers on the market that have jobs and children that need to move from one home to the other.
What this means for selling:
As a seller, be aware that most buyers want something move-in ready when they’re paying high interest rates. They also don’t want to have to take out high-interest construction loans or pay for construction materials that are still expensive following supply chain issues and the impact of inflation. If your home needs a lot of updates and repairs, buyers are more likely pass it up for other options than they would be in a lower interest rate environment.
If your home is in need of repairs and has been sitting on the market, a cash buyer can provide a fast sale. If you’re looking for a reliable cash buyer, we’d love to help you at MarketPro.
Work with MarketPro:
We’ll give you a fast cash offer for your current home just as it is now; no repairs, no upgrades, no inspection, no commissions or fees. You can even choose your exact closing date. Our team will walk you through your quote, including a review of what your home would likely bring on the open market.
If you’re in Washington, D.C., Maryland, Virginia, Pennsylvania or Florida, we’d love to show you how easy and stress-free the sales process can be. Contact us today for a same-day, no-pressure quote.