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Just about everyone is on their toes waiting to hear where interest rates are heading. The Fed has pretty much indicated that they plan to raise rates at their next meeting on December 16. How much will a hike in rates affect you?
I’ll give an example to show you how rising rates affect your bottom line when buying. For a $250,000 loan, if rates go from 4% to 4.25%, the monthly payment goes up by $36. That doesn’t sound like much, but it certainly adds up.
The Austin area is already suffering from a lack of affordable housing. First-time home buyers simply don’t have many options right now. A rise in interest rates will effectively push these buyers even further out of the marketplace, which means there will be fewer buyers in the area. Buyers who are more able to survive the rise in rates, but who are still somewhat tight financially, are going to be forced to look for more affordable homes.
A large part of our market is investors. Last spring, our most affordable homes, those listed under $250,000, saw a lot of multiple offers. The winning bid was often an investor who was willing to buy the home for a high price with the intent of cashing in on future appreciation. The rise in interest rates and the subsequent rise in payments will create cash flow issues knocking some investors out of the market.
Once rates go up, they’re likely to continue climbing. This steady rise in rates will push more and more people off the fence and into the market, before rates get too high and scare everyone off. If you’re looking for a good time to buy or sell, the next six months are ideal.
If you have any questions about where our market is heading, please don’t hesitate to reach out to us. We would love to help you with all of your real estate needs!