How’s the Market? While no one can accurately predict exactly what’s going to happen in the future, here are some projections based on the trends we are seeing locally, as well as the latest news of the Fed raising rates.
YOU’LL NOTE:
• The Federal Reserve officials voted Wednesday to lift interest rates and penciled in six more increases by year’s end, in an effort to slow inflation.
• What does this mean for housing? The fed-funds rate influences other consumer and business borrowing costs throughout the economy, including rates on mortgages. Raising rates typically restrains spending, while cutting rates encourages such borrowing.
• So while the Fed doesn’t control the supply of homes for sale, they do however influence demand due to the ripple effect the rate increase will likely have on mortgage interest rates.
• As rates increase, buyer demand will cool—because borrowing becomes more expensive—which will then help stabilize housing inventory levels (assuming that we don’t face additional head-winds on the supply side).
• All that being said, in increase in mortgage rates will take time to have an impact on inventory levels.
• So It’s possible that demand and bidding wars will pick up in the short term as we head into the Spring market as prospective buyers try to secure a house ahead of expected rate increases this year.
In summary, it’s projected that in the short to medium term, when factoring in the upcoming Spring Market coupled with extremely low inventory levels (it was at a record low as of February, according to the National Association of Realtors), we may see a price uptick.
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(Prices and inventory current as of Nov 30, 1999)
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