As summer winds down, we've seen the market calm down a bit. This is to be expected, as there is typically a lull before the fall months.
Right now, you can get a 30-year fixed-rate for as low as 4% if you are eligible. We've seen rates hovering in that general area for 12-18 months, so we've almost started to take them for granted. What we need to ask ourselves is: what happens when those rates go up?
Recently, we came across an article from Stansberry & Associates that said something that surprised us. "Contrary to popular opinion," the author wrote, "based on data going back 46 years, home prices tend to do better when the FED is raising interest rates." According to the data, since 1986, whenever the FED cuts rates, the average 2-year gain on housing prices is about 8.9%. On the other hand, when rates start rising, the average return on home sales is 13% - virtually 4% higher than when rates are cut.
How can this be? This all seems to go against conventional logic. We think it's because when interest rates begin to rise, a lot of buyers jump in the market to secure a low rate before they rise much higher. The competition this generates allows homeowners to price their homes aggressively, as there are many buyers looking for homes.
With interest rates as low as they are, now appears to be a phenomenal opportunity to buy. As our market continues to stabilize, we'll probably see home prices rise - and we expect interest rates to rise with them.
If you want to discuss this interesting topic or think now is the time to make your move, give us a call or shoot us an email. We would love to chat with you and help you explore your options.