The Feds, Rising Rates & How it Benefits you!

The Feds, Rising Rates and How it Benefits you! July 28, 2022

So the Feds raised the rates again. I know you’ve heard about it by now. How could you not? It’s all over the news and social media. The impending doom of the 4th rate hike this year, gasp! Here's the thing, it’s really not so bad in fact it’s good! Sound crazy? Not if you look at rates today compared to years past. As of Thursday July 28, 2022 rates are around 5.78% (depending on various factors). In the 70’s 7% was on the low side. In the 80’s the average was around 16% with a peak of over 18%! In the 2000’s 5% was low. Jump to 2020/2021 and we see shockingly low rates in mid to high 2% & 3%

As you see, over the last 50 years an interest rate of +/- 5.78% has been a low rate during most periods. The reality is the 3% lows we’ve had over the last year were bananas! They were not meant to be long term and were not sustainable. They did what they were meant to do, stimulate buyer demand for mortgages! They may have done it a little to well….

When the Fed began lowering rates at the beginning of the pandemic it triggered demand. When they further lowered rates demand skyrocketed. This high demand came at a time of 30 year low inventory, so house prices shot up. The Fed in their effort to boost the market, supercharged it. The rates coming up has caused people to calm down, and it's wonderful. Instead of a house sitting for a matter of days, getting dozens of over-ask offers, contingencies waived, houses are now staying on market longer, many have price reductions, and buyers aren't waving goodbye to their due diligence. This is becoming a more normal and sustainable market with still low rates. But wait, what about the crash everyones talking about?

I hear this on the news everyday now, it drives me crazy! It’s as though it’s trying to be willed into existence. We are in a much different market than we were during the last crash. Lending institutions have been stringent in how they lend money and we are in the middle of a housing crisis. The amount of people, even now, who want and or need to buy outweighs the inventory. So while no one can predict what the market will do, these 2 indicators alone show the resilience of the market against a crash. This doesn’t mean prices wont come down because they already are! It does mean that we likely aren't going to see 1m homes selling for 500k. It should prevent home prices from climbing even higher and becoming even more unaffordable. Especially as The Fed is set to have 3 more meetings this year. They are anticipated to raise the interest rates each time. With 3 more hikes predicted we could end up at 6.5% by years end.

This current market of spoked buyers and lower interest rates present great benefits to anyone looking! LOCK YOUR RATES!! Interest rates are still low, we are heading into the statistically cheaper fall/winter markets, with an increasing number of homes on the market and interest rates are predicted to go up. All of this makes this a great moment to secure your rate and find your home!

Courtney Ayers

License DRE #02121181

Breaking Ground Real Estate