Fed approves increase in interest rate: How does it affect real estate?
The United States Federal Reserve Committee has raised interest rates by 0.75 percentage points, Federal Reserve Chair Jerome Powell announced on Wednesday. This brings the target range for the short-term borrowing rate to 3.75-4%, which CNBC reports is the highest since January 2008.
Kristen Zorda, senior loan officer for Evolve Bank & Trust, said the rate increases are not necessarily reflected immediately in mortgage rates.
“As of today, there’s been the normal movement in the market,” said Zorda. “Not to say that we won’t see something in the future. … We just don’t really know what to expect. Right now, everything’s still kind of the same as it was before the meeting. We’re not 100% sure where things will go by the end of the year.”
Keller Williams Capital District real estate agent Paul Smith said the rates are still lower than they were in the 1990s, and noted that people could possibly refinance down the road.
“As people are scared with this rate, they still have the option if they want to buy, they can always refinance down the road when the market settles out, inflation goes down,” said Smith.
Zorda said a positive is the “leveling out” of housing prices.
“That’s good for buyers who have kind of been waiting for that to happen, after we had that really hot market the last couple years,” Zorda said. “Now we’re starting to see that sellers are decreasing the prices of their homes, there’s not as many multiple offers.”
Smith echoed this, saying that while inventory is not abundant, “there is some stuff that’s coming on.”
“With more inventory, it’s going to give customers more to look at. I don’t foresee you having to have a bid war anymore to win a house, unless you’re in certain areas,” Smith said. “I see a lot more balance.”
Zorda said that it is still a good time to buy or sell a home, saying that “comparatively,” rates are still low.
“If you think about what you borrow money for, and the rates that you borrow it, credit cards are upwards of 20-some-odd percent sometimes,” said Zorda. “You’re borrowing hundreds of thousands of dollars over 30 years, and you’re only being charged, let’s just say, 7% or something on the 30 years right now.”
Smith also said that while interest rates may rise, many will be able to purchase a home for a lower price.
“They also would’ve paid a lot more money for a house,” Smith said. “They might’ve got a lower interest rate, but they would pay a lot more for a house on the market. I think they’re going to find a lot more balance in what they’re buying.”
And Zorda stressed that the Capital Region is “still a great market.”
“The Capital Region is an amazing place to invest, whether you’re buying a primary home, a second vacation home, or you want to rent something out,” Zorda said. “I highly recommend using real estate as a tool for investing and building wealth. (It’s) definitely still a great time. If you’re on the fence, it’s just time to go for it.”
Smith said prospective buyers should not “be scared of the market, still look into it.”
“Because there’s a lot of options out there for first-time home buyers,” said Smith. “There’s grants available, there’s things out there that can still save them money that can counteract the interest rates. Don’t give up. Stay positive, and stay focused.”