The new year introduces a new set of real estate rules. What will 2016 bring us? We can definitely count on seeing some interest rate hikes. If you're thinking of buying or selling a home in the next six to twelve months, these interest rates will have a direct affect on you.
Janet Yellen from the Fed said:
In the policy statement issued after its October meeting, FOMC reaffirmed its judgement that it would be appropriate to increase the target range for the federal funds rate when we had seen some further improvement in the labor market, and were reasonably confident that inflation would move back to the committee's 2% objective over the medium term.
Because of low unemployment rates and a healthier economy, the Fed has been able to raise interest rates for the first time in nine years. Right now rates are at 3.9%, but they will rise to 4.5% soon. Most economists think that over the next ninety days, interest rates will crest 5% for the first time in years.
If you're looking to sell a home, know that your buyer has a 4% rate locked in right now. You have the next thirty days to get your home on the market. You will see a lot of buyers coming into the market before the spring seller season begins, which is fantastic for you. You will have a better pool of buyers who have more purchasing power and, with fewer properties available, less competition on the market.
Also as a seller, you may have also seen your home value go up, but in the next ninety days, as interest rates increase, your home will drop back down in value.
If you're a buyer, this interest rate increase means that in ninety days, your monthly mortgage payment will go up $150 a month on average, and $1,800 a year. In order to afford the same home you're looking at now in 90 days, you will need to make $6,000 more per year. The likelihood of anyone getting a $6,000 raise in the next couple months is unlikely, so most buyers will have to look at lower priced homes.
What does this mean for you now? Buyers: take advantage of low rates. Sellers: take advantage of these motivated, quality buyers who have locked in a 4% rate.
If you have any questions about today's video, give me a call or send me an email. I would be happy to help you!