The Federal Reserve hiked interest rates for the first time in 10 years. This is a significant indicator for the future of the real estate sector and home interest rates. In the immediate future housing interest rates will remain fairly unaffected because 30-year mortgages are priced off 10-year Treasury note yields, which do rise as short-term rates climb, but not as steeply. In the long term, this could be the start of a slow up-tick in real estate interest rates. Higher interest rates equal higher payments for the same value of home. As an example, a $200,000 house at a 4% interest rate/30 years would have a principle and interest payment of $954/month. A $200,000 house with a 6% interest rate/30 years would have a principle and interest payment of $1,200/month. We have been extremely lucky to have interest rates so low for so long. A 7% interest rate was considered the market average prior to the housing bust of the mid 2000's. Interest rates have crept up to as high as 18% in the 1980's. (See chart below)
Excerpt from USA Today article by Paul Davidson:
"Doug Duncan, chief economist of Fannie Mae , the giant government-sponsored funder of mortgages, expects this week's Fed hike of a quarter of a percentage point to have virtually no immediate impact on Treasury or mortgage rates, noting markets already have priced in the move. Assuming the Fed raises its rate by a percentage point over the next year, Duncan expects 30-year mortgage rates to drift from 3.9% to 4.1% during the period. That would boost the monthly cost of a typical $225,000 mortgage by $26 to $1,454 — not enough to deter most buyers.
What does this mean to you as a home buyer/seller in Arvada? If you are planning on making a move in the next few years, the soon the better. Although, there is no need to panic and have a fire sale. Interests rates climb slowly but I think we have seen the bottom of the interest rate market. From here they will rise and the cost to buy a home in the future will be higher. If you have any questions about selling your home, buying a home or real estate loans please don't hesitate to contact me at adam@westwoodsrealty.com or call/text me on my cell 303-913-2326.
Thank you,
