Interest rates impacted the United States economy last year as much as nearly anything. Rates were increased for a variety of reasons including to slow down inflation. While it seems to have done the trick, many are wondering if the rates will finally begin to go down, especially since things are starting to drop in prices, specifically homes. Properties that were selling within weeks are now sitting on the market for months and homeowners are getting anxious. They are not getting quality offers because the pool of quality buyers is not as deep as it once was.
Investors are going to make up the largest batch of buyers right now until rates get lower. Once buyers can afford to jump back in there will be more competition meaning you can expect prices to go up once again and homes to start flying off the market faster. However, if you are waiting for rates to go down, you may have to wait a while. It’s important to consider the right financial situation, the right property and then the rates. If you can get the house you want now, do it, but if the rates are having an impact on your decision, you can expect some changes in 2024.
Latest Interest Rate Moves
For now, rates will not go up again and if anything, they will begin to go down. This is a sign that costs are steadying and that demand has cooled down. However, if rates need to go up again, they will probably start somewhere between the summer and fall of 2024. The reason they may have to go up again is if inflation and the cost of living shoots up once rates are lowered. Consumers are ready to spend, they just cannot afford to borrow for what they want to purchase.
Lower rates will eventually mean an upswing in home and auto sales as well as more sales in other industries. While this sounds great for these industries, inventory has been or remains low meaning more consumers may cause inventory to be a problem again. The concern is that if rates are lowered too fast, it would cause another surge in inflation and costs. By keeping them the same or slowly lowering them, it allows for only a small number of qualified buyers to be ready to move forward.
Why They Went Up
It is a problem in the local and national economy if rent becomes more expensive than buying. If someone is paying $3,000 a month to rent a house and $2,000 for a mortgage on the same type of property, why would you rent? The cost of living was going up for everything but while property values had skyrocketed, the interest rates to borrow money had not. They actually went down meaning more and more people bought because it was more affordable to borrow money.
Interest rates had to go up once the cost of living was too expensive and that includes inflation. Groceries were becoming too expensive and still are in many cases. By squeezing the borrowing of money, institutions had to lower their prices which has happened and benefited millions. However, there are people who benefit from these changes just as there are people who do not benefit from them.
Will They Go Down
Right now, interest rates will probably remain on the high side. The reason is because of consumer demand to spend. Consumers are waiting and desperate for cheaper rates so that they qualify for loans. The income side of things is not the issue, rather the issue has become a consumer’s ability to manage their own debt. However, if it’s easy and cheap to borrow money, managing debt is not as big of an issue. Higher rates make it harder to manage that debt but also keep more people from increasing their debt.
The economy is going to have to respond to these changes and see where things go. The consumer dollar is strong and there are still jobs out there. However, one mistake that people make when looking at real estate marketing is that they forget to take into consideration the location. Yes, the rates impact everyone buying a home and borrowing money. That may not slow down the activity in popular areas meaning the rules may be a little different where you are buying. That’s why it’s smart to work with local real estate professionals.
How They Impact You
Right now you want to buy a house and you have a budget of $500,000. You have $100,000 to put down which would cover the 20% you need. You have no debt and a strong income. However, when you apply to the lender, they have to factor in your income-to-debt ratio and if the rates are higher, it could push the ratio too high meaning you would have to borrow less money. Now, because of the higher rates, you are only able to budget for $450,000 which can take you out of the running for the house you want.
Higher rates are not going to provide you any specific advantages other than possibly keeping things within reason as far as pricing. Without rates increasing, the cost for some goods could double within a year. The hope is that the economy is now stabilized well enough to get lower rates which will hopefully provide it a much needed boost.
Speak With Your Realtor
Is now the right time to buy? Are you ready to buy? What area do you want to look in? What do you want in a home? You have dozens of questions you need to answer before moving forward. The best way to know those questions, and answer them is to work with an experienced realtor. However, if you want to get the best, not only in service but also results, you need to work with someone who is local and experienced with the area you want to buy in. That makes a world of difference and can help you get the property you want, regardless of where the rates are.
