The State of Affordability, Housing Shortages, and Rising Interest Rates in Today’s Real Estate Market.
So what’s up with the state of the real estate market and interest rates? Real estate is like many things in life – connected to many things. My time researching real estate, interest rates, and the economy in general, helps me to advise my clients and understand the current trends. The purpose of this post is to share my insights on the market as a resource.
Federal Fund Rate & The 10-Year Treasure Yield
As some of you know, the Fed met last week and did not change the federal fund rate or benchmark rate (the rate banks charge to lend to each other). That rate is around 5.50% right now, the highest it’s been since 2007. This rate affects mortgage interest rates, but the US government’s 10-year treasury yields also play a part, (The 10-year treasury yield is the amount of debt the government is borrowing to run a deficit). When the yield on a 10-year treasury bond goes up or down, mortgage rates go up or down. So what makes a treasury bond rate go up or down? A lot of things: government debt, fiscal policy, central bank purchases, trade deficit, regulatory policy, inflation…I think you’re getting the idea. It’s complicated and there are a lot of moving parts. Bank Rate does a good job of getting into more of the details if you’re interested.
Curbing Inflation
The basic reason why the Fed did not change the benchmark rate when they met this past Wednesday is inflation. It’s hovering around 3.8% right now. They would like to see it at 2%. A lower benchmark rate would kick up that inflation number they are trying to get a handle on. (Anyone fill up their car lately…yikes!) So, mortgage rates have settled at over 7% for now. Will rates change anytime soon? The Fed meets again in June. It all depends on how the inflation numbers look then. And I’ve heard rumblings about a possible rate cut in September.
Mortgage Interest Rates
And what if mortgage interest rates drop in June or September? I know a lot of buyers and sellers (also hoping to buy again) waiting for a change in the rates before they purchase. When the rates go down, there will most likely be a rush of buyers wanting to purchase. We are back again to supply and demand: too few houses, too many buyers. And if that happens, prices of homes will go up as well as the competition to purchase those homes.
It Might Be a Good Time to Buy
There are a few signs that now might be a good time to buy despite the mortgage interest rates.
Flexible Sellers
A recent survey from realtor.com shows a real shift in sellers’ attitudes. Sellers are less likely to expect over-asking price offers or bidding wars. Fewer shoppers and more flexible sellers mean it’s easier to make an offer that gets accepted while the rates are still 7%.
More Inventory in Florida
Inventory in our area has increased. There are more homes to choose from, even if the increased inventory is townhomes and condos. A condo or townhome might be a place to start if you are a first-time buyer.
Help for First-Time Buyers
Here in Florida, the Hometown Heroes program is being expanded. As of July 1st, a $100 million will be released by the state of Florida, helping first-time home buyers with down payment money (up to $35,000). There are fewer restrictions on who qualifies for the program (previously it was healthcare workers, firefighters, law enforcement, and teachers). The biggest qualifications are full-time employment for a Florida-based company and no home ownership in the last three years. If you or someone you know may qualify, find out more to see if you see if this program might help you.
