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Interest Rates Moving Forward

If you’re expecting the trajectory of the housing market to result in a state reminiscent to the Great Recession of 2008, have no fear! The market variables that resulted in the housing market crash no longer exist in today’s world. However, as home prices and interest rates continue to rise, it is best to buy now rather than later.

Home prices were already on the rise before the pandemic, yet the past few years have created an even more competitive market. With everyone staying home now more than ever, what a better way to adapt to a new world than investing in that home! Seemingly, everyone else had the same idea. The effects of the pandemic only added more fuel to an already hot market.

Interest rates are starting to correct to higher levels

“At the beginning of a pandemic, in the face of a developing national health crisis, the Federal Reserve took action. They pledged (and proceeded) to buy debt and mortgage-based securities (MBDs) in an effort to help the economy. This resulted in artificially high demand for these MBDs, driving down the mortgage rates. For a time, this helped add stability to the economy. It made it easier to access financial resources, investments, and loans – such as mortgages. It’s not surprising that so many individuals decided to pursue homeownership during the pandemic. Demand was already outpacing supply. The lower interest rates made a home purchase that much more attractive, tipping the balance further.”

The increase in long term interest rates has been driven by global economic recovery. To add to that, the inflation in the US has pushed our long-term interest rates up even higher, specifically relative to other lower-inflation countries. Because of this, the mortgage industry will find fewer and fewer homeowner’s refinancing. In spite of the raising rates, the demand for houses is likely strong enough that the higher mortgage rates will only have a small impact on the current market.

A balanced market, as mentioned above, is the best market for the economy. However, a balanced market equals higher interest rates, and higher interest rates equals less buying power for home buyers. The later you buy in 2022, the greater your chance for a higher mortgage rate. In the current housing market, the cost of waiting to make a move in the real estate market will most likely cost you more in the long run.


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