Author: Daisy Smith
Home prices are not rising as fast as they had been, but as interest rates continue to increase, demand will likely soften as more buyers are priced out of the market.
That’s bad news for some buyers but good news for those with the money to stay in.
The Federal Reserve has announced that it will be raising interest rates this year for the first time in a decade. It might change how much you can afford to spend on a home, and it’ll also change how much you’ll end up paying over time.
You can make wise decisions about your mortgage by being aware of interest rates and the economic factors that can affect your future decision.
Here are some things you need to know:
This spring’s housing market in the United States resembles a multi-car accident caused by strong forces colliding.
The Overall Picture
Mortgage interest rates have increased more quickly than in years, making house loans less affordable. To build homes more rapidly, builders can’t acquire enough resources. However, rapid economic growth and irreversible population trends are driving up demand.
Why does it matter?
There will probably be a discrepancy between supply and demand, making the market uncomfortable for everyone involved.
Current Situation
A 30-year fixed-rate mortgage now has an average interest rate of 4.42 percent, from 3.76 percent. Since 1987, that is the most significant three-week increase. It was 3.05 percent only a few months ago. However, those figures have already become old because they are rising virtually weekly.
The Result
A change in the Federal Reserve’s rhetoric can be seen at higher rates. The central bank only increased its short-term rate by a quarter-point. However, long-term rates, such as those on mortgages, are determined by investors’ expectations for the direction the economy would take going forward, and Fed policy.
Because home builders have not been able to meet the demand for as many homes as needed, sales volumes have been constrained on the market’s supply side.
Other consequences:
The executive chairman of KB Home, Jeffrey T. Mezger said that building homes and not selling them is the most significant difficulty.
Among the materials in short supply are steel ducts for HVAC systems, ovens, garage doors, windows, cabinets, and siding. The lack of supplies is anticipated to continue throughout the year.
It can even be more difficult as the housing market enters a new high rate. Although rising mortgage rates may restrict purchasers’ ability to bid, high prices encourage suppliers to increase output. Moreover, homeowners with low mortgage rates could be less willing to sell and give up the advantages of a rate under 3 percent, further reducing supply.
Conclusion
Rising interest rates are causing some homeowners to reconsider their plans to purchase a new house or sell their current property. The Federal Reserve has raised its benchmark rate four times since December 2015, and economists expect an increase. Homeowners who want to refinance their mortgages should act before rates increase further. If you plan to sell your home, you might consider selling sooner rather than later.
