Potential home buyers know that interest rates are climbing. Factors causing this rise are increasing wages, a stronger economy, and a positive outlook for growth due to the GOP tax cut. These indicators translate into anticipation that inflation may rise, which will bring about rate hikes by the Federal Reserve to keep prices stable.
It’s not completely clear how a rate hike will affect the housing market. The tax bill passed in December will affect housing in many ways but those changes will not be immediate and may take years to play out. Rate hikes may cause some to panic but an interesting fact is that it’s been proven there is no direct correlation between mortgage rates and home sales and prices. This can be hard to understand for most people.
Buyer demand is still high despite the rising rates and increasing home prices.
15 and 30-year fixed-rate mortgages history in the United States.
In the 80’s and 90’s rates were in the double digits. In the current market a small increase was inevitable and most people recognize that rates are still historically low. It’s serving as a motivating factor for people to get off the fence and buy sooner rather than later.
The decision to purchase a home is also influenced by an increase in employment and wages, and a strong economy.
People want to invest in a home that will appreciate over time. To make home ownership possible they are considering lowering their original housing budgets and/or possibly coming up with a bigger down payment.
For some potential buyers affordable housing is an issue. Inventory is low and demand is high causing rising prices. There are fewer lower to mid range homes to choose from so those looking for a starter home may be most affected. It doesn’t appear that this has caused potential homebuyers to abandon their search but some are realizing it may be a good idea to act now. Buyers should be prepared for possible bidding wars and inventory disappearing at a faster pace.
In these times, home ownership is still an exciting possibility for prospective buyers, they may just need to change their approach. Acting quickly, keeping within their budget and coming in with a larger down payment are smart choices to help make their dreams a reality.
Now is the time to take advantage of the low rates!
To get further information about interest rates click here.