Rates have increased as expected, and more importantly, the Fed has signaled that we can expect 6 more this year. While the news may initially seem grim, Shawn Rawls recently summarized the news as “a favor” — and he’s right.
To this point, the speculation of future rate increases in an effort to curb inflation has been just that — speculation. When the future is unclear, it’s natural for both buyers and sellers to take a step back and hope for better days ahead. The potential cost of waiting existed, but without a clear indication of what to expect next for our market, it hadn’t yet felt real.
With the forecast of 6 more interest rate increases, the cost of waiting things out suddenly comes into focus. Buyers and sellers are now presented with a window of opportunity to confidently take action before these next rate increases hit. Therein lies the “favor” the Fed has done for us with their latest announcement.
The opportunity at hand starts with sellers, given their potential to benefit both from the ability to sell for top dollar, while taking advantage of current rates before they jump again.
Could you wait and sell for more?
Potentially, yes — but consider this. For every 1% increase in rates, buying power decreases by about 10%. We’ve seen such an increase in mortgage rates in the past month, whereas property values have increased by 12.7% over the past calendar year, and further growth is not guaranteed. While waiting may net you more when selling, if you are planning on purchasing with the proceeds from your sale, the greater impact on your bottom line comes from rising rates.
For buyers expecting price growth to stall, our strong job market and continued population growth through relocation make the prospect of a bubble anything but certain. What is certain, with the Fed’s plan to continue increasing rates, is that the cost of borrowing money will increase.
It’s no doubt been a tough run for buyers in our market. If you missed out on the recent record-low mortgage rates, we now know that continuing to wait will only diminish your buying power further. If you can make a purchase without overextending, rates are still comparably low in a historical context.
The market we’re currently in is unlike any we’ve seen before, and we’ll continue to keep a close eye on any developments to keep you informed. If you have any questions about buying or selling, give us a call at 214-267-9222 or fill out the form below and one of our agents will be in touch.