No matter what your occupation, we’ve all noticed rising prices in everyday items. Whether it’s fuel, clothing or groceries, inflation has been taking a steadily increasing amount from our pockets.
It’s no different for real estate. In case you missed it, last week’s announcement by the Federal Reserve set a big increase in interest rates and means several more rounds of rate hikes are on the way.
Dr. Lawrence Yun, chief economist for the National Association of Realtors, recently shared valuable insight on what’s happening and what to expect.
“The short-term ... [Federal Reserve] funds rate the Fed directly controls has risen by 175 basis points. But the 30-year fixed rate mortgage has risen by nearly 300 basis points.
“On the same $300,000 mortgage, the monthly payment has risen from $1,265 in December to $1,800 today. That’s painful and will shrink the buyer pool.”
Home sales have recently been trending down toward 2019 figures, says Yun, and sales could fall even further, with some inventory sitting on the market for more than a month – like in the pre-pandemic days.
“Pricing a listed home properly will be the key to attracting buyers. In the meantime, rental demand will strengthen along with rents. Only when consumer price inflation tops out and starts to fall will mortgage rates stabilize or even decline a bit.
“That’s why providing additional oil supplies will be critical in containing consumer prices and interest rates.”
These higher interest rates are aimed to combat inflation and will definitely throw a wet blanket on the real estate industry until they come back down again. And for those who think these rates won’t have much of an effect, consider that higher interest rates equate to less buying power.
Compared to only a year ago, if you were looking to purchase a $400,000 home, with the increased rates, your buying power decreases to $300,000. Buyers might have to look at smaller homes with less amenities to stay within their budget.
So, yes, the housing market continues to shift everywhere, which is why it’s crucial to utilize the expertise of a Realtor. Whether you’re buying or selling, finding the right window to purchase or sell a home is essential.
Always trust your real estate needs to a Realtor. That’s Who We R.
Founded in 1912, Greater Chattanooga Realtors is a regional organization with more than 2,500 members servicing Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and boards of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a multiple listing service that’s one of approximately 600 MLSs in the country and services more than 2,700 users.