Today, in just a few short minutes, the Fed will meet and rates will rise. Sound the alarm, and cue the real estate industry for a scene not too unlike the Wall St floor. Why is everything about to go crazy? Why are you about to hear, “You have to buy NOW,” and, “Don’t buy now, WAIT,” and “You missed your boat!” and all the other conflicting stories at the same time? Why? Because very few people in the real estate industry take the time to educate themselves before sounding the alarm.
Bottom line is the Fed is finally tightening, and I say “finally” because this is the first time since June 2006 that the Fed has risen their rates. And honestly, it’s about time. We’ve been playing with fake money for nearly a decade now, borrowing home buyers from the future, and now it’s time to get back to reality. And no, doing this won’t crash our housing market. The housing market will correct because of the 20%+ annual appreciation we’ve seen in Greater Denver the past few years, not because of interest rates.
Mortgage rates, incidentally, are not directly tied to the Fed’s rates. They are more closely tied to inflation, and there’s no inflation right now. Will mortgage rates go up? Most likely. Will it be drastic? No. Does even a small increase in interest rates affect a home buyer’s buying power, thus affect a home seller’s available buyer pool? Yes.
So what does all of this mean for the Ken Caryl real estate market, and the Greater Denver real estate market? Mortgages with an ARM will adjust up. HELOC’s that adjust will go up. Buyers will have some of their buying power removed, potentially lowering prices, and many buyers will be more motivated to act, potentially increasing sales. Home sellers will have to realize their house just had a price increase, even though they didn’t increase it, and they may have to come down to attract the same buyers. And a larger pool of buyers means better fishing, so you may see an increase in inventory.
Bottom line is people always need to buy and sell houses. Interest rates do affect what is bought and sold, and how quickly it may go, and rates don’t determine a market. They are an element of the market. If you’d like more information on selling your home in Ken Caryl, or learning about how much you can afford with the new rates, please call me at 303-578-6260 today.