Every month I put out an East County real estate market update and here is the February 2018 market update for you. I dive into rising interest rates and other important info you need to know.
Why am I dressed like this? I’m going to a masquerade ball tonight with the Women’s Council of Realtors.
Hi everyone. Krista Mashore, Homes by Krista. According to David Payne of Kiplinger, inflation will be 2.5% in 2018, which is a .4 increase from 2017. Keep in mind as inflation rises, every dollar you own buys a smaller percentage of goods and services.
Put simply, what does this mean? Higher inflation means that the Federal Reserve will keep boosting interest rates. According to Kiplinger, the Fed is expected to impose three hikes in interest rates in 2018. The Central Bank sees inflation running close enough to it’s 2% target, to gradually bump up interest rates to a more normal range. We all know that rates have been extremely extraordinarily low. Right?
And finally, what everyone’s been predicting is happening, rates are going to rise. In December, rates hovered around the low fours and now they’re in the mid fours. Remember, for every 1% increase in interest rates, a buyers buying potential goes down by 10%.
So, you would think that this would mean the market would slow down, however, inventory is extremely low, so we’re seeing bidding wars on homes right now, locally and also throughout the nation.
Why? Because of supply and demand. And this isn’t expected to change anytime soon. Why? For one reason, we have the largest group entering the housing market than ever before, which is the millennials.
How does this affect sellers? Sellers, with inventory remaining low, expect to continue to see housing prices increase. However, if interest rates keep on going up, the amount of potential buyers that can afford to buy your home is actually going to go down.
How does this affect buyers? Well, if you’re on the fence, if interest rates keep going up, you’re going to be able to afford to buy less. So, you should buy soon, however, if inventory being slow low, expect to pay more. It’s kind of like a double negative, not so much fun is it? So acting quickly will save you money.
I hope this market update finds you well. Thanks so much for watching and please, please, please like, share and comment, it helps you and it helps me. And here’s the real Krista Mashore, and as always make it a great home, selling and buying day.