March 7, 2015 by Jeff Lowen
According to (Bloomberg) — “Federal Reserve Bank of Richmond President Jeffrey Lacker said a strong U.S. payrolls report bolsters the case for an interest-rate increase by the middle of the year.” Strong employment reports and the economy screaming “I’m getting better!”
Our market is significantly shifting and in order to capitalize on it and not find yourself the recipient of tens of thousands of dollars in unnecessary expenses – there is one option. Act quickly! I say “unnecessary expense” because if you’ve thought about selling your home, or you’re getting ready to buy one, what’s the impact of an interest rate change like this?
Let’s look at three scenarios: Buying, Selling and refinancing.
If you are or will be Buying a Home: Without getting too complicated, a simple one point uptick in interest rate quite simply means those homes you were looking at, loving the pictures, neighborhoods, schools, amenities… Will now be someone else’s home because you may not be able to afford it. Mortgage loans are front loaded, so the majority of your payment for the first 20 years is interest. Higher interest rate = larger monthly payment. Awe! Just out of my budget! And now, you’re looking at homes that you’ll have this nagging voice telling you they’re just not as good as before.
If you’re Selling or thinking of Selling a Home: This doesn’t affect you at all! I wish. Those countless buyers you want breaking down your door to make an offer at a price you want – are all now expecting you to adjust your price down! That is, if many of them haven’t been kicked out of the home buying market because of the interest rate hike! You say, “who cares, there’s more where they came from…” Yes, that’s true, but these Buyers have been looking at homes over and above the price of yours and they’re not happy about it either! So expect nit-picking home inspection items, criticizing every detail, unreasonableness and sometimes less than a smooth transaction. Or, you could price your home more congruent with the shifting market. What does that mean? Send me a note and we’ll look at options. It’s not all bad. It presents an opportunity to be the best value in the market, because the other Sellers are experiencing the same thing!
Considering a refinance? Interest rate increases = less available money, larger payments, lower appraisals, the list goes on. The real estate market is very interdependent and as my familiarity with the ripple effect would suggest, one small pebble tossed in the market’s pond – a minute interest rate change, stronger job market, bonds and indices changing – all mean one thing. A change for everything else.
You have to determine what’s best and right for you. Get help, message me, contact a trusted advisor, seek professional opinion. This doesn’t mean your school bus driving neighbor, or your family friend that’s in the IT business and sells real estate as a hobby. I mean a full-time, career professional that’s in the field to make a difference by changing lives like yours for the better!
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