Interest Rates Rising? What That Means For Real Estate

December 8, 2015

Over the past few months the FED has been contemplating raising interest rates. They have not made the move yet but plan on an increase after the first of the year. With rates already at an all time low of 3.65 %  a small increase in rates over 4% is not cause for concern in the real estate market.  Buyers are eagerly getting loan approval and moving towards a home purchase faster now than in the last year.  With the fall/winter real estate season super busy it seems that the most important factor holding back sales is a lack of housing inventory. Just last week alone we had more homes go UNDER CONTRACT than were listed. 

This is a good thing for sellers who are seeing their homes spend less time on the market. The lack of inventory for existing homes in now spuring home builders to increase their production which is very important for a growing real estate market. Existing home sales are still on the rise but new home construction is becoming more and more active as lenders make it easier on builders to get construction loans.The National Association of Home Builders has predicted that first-time home buyers (who most often purchase entry-level homes) will comprise 18% of new-home sales this year, up from 16% last year. While that is still short of the 25-27% share of buyers that first-time home buyers comprised in the market from 2001 to 2005 it’s a growing trend that the economy is happy to see.

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All in all, the real estate industry is still growing and making a comeback. If the FED raises the interest rates this  winter just keep in mind that going up over 4 percent is still considerably lower than the rates back in the BOOM days of 2001-2005 when they were 5.5 to 6.5 percent or even the 1990’s at 8-11%. Knowing your market is key and if you have any questions at all, please reach out to your Murney agent!

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