What’s happening with interest rates?

As we all know, interest rates have been at record lows for quite a while now. But how long will that last? No one knows for sure, of course, but now that the economy has mostly recovered from the devastating effects of Covid, there’s likely no long-term reason to keep them at their current levels. We’ve already seen some creeping up, but how high  they’ll go (and when) is anybody’s guess. Is it possible that we’ll see rates as high as 5% within the next 12-24 months? Many are speculating that those kinds of increases are likely to happen. Time will tell.

How do rates affect the real estate market?

The upside that occurs when rates are low is that many more people are able to qualify for a home loan. When that happens, sales prices skyrocket because of the sheer number of home buyers flooding the marketplace. Here’s why. If only two people can afford to buy your home, you’ll have to keep your price within their reach. But if 15 people want to buy your home, it will become a bidding war, and your final sales price will likely be much higher.

However, if rates go up, the exact opposite will happen. Fewer people will qualify, and hence the tide will change. Home prices will be negatively impacted, but no one knows for sure to what degree. Nonetheless, when rates increase, it’s likely that we’ll see an end to the extraordinary increases in value that have taken place over the last few years.

What do you recommend we do?

At the risk of sounding like typical real estate agents, we absolutely advise buyers to buy now, and obviously for sellers to sell now. For buyers, you’re able to lock in extremely low rates and the resulting low monthly payments for the next 30 years. For sellers, the market is incredibly hot, meaning your home is likely to sell quickly and at a premium price. Now is the time for both sides of the fence to reap the benefits!