2022 sure hasn’t been boring. Inflation rates are at 8.6%. How does this affect housing? If you guessed mortgage rates than you would be correct. The pandemic spoiled us with low interest rates. Really low. 2.75% low (for a 30-year mortgage). Today’s interest rate for the same mortgage is up to 5.10% (looking at 6% soon). This is freaking out homeowners, buyers, and investors alike.
WHY IS THIS HAPPENING?
In short, the Federal Reserve is trying to control price hikes and costs of living. When inflation is high, everything goes up. Gas prices are up 48.7%, rents are up 10% (or more) and food…. Almost 12%. The Fed raises interest rates to control how much money is floating around.
WHAT DOES THIS HAVE TO DO WITH MORTGAGE RATES?
When rates change, the cost for banks to borrow from each other and store money in the federal reserve (the federal funds rate) affects the treasury bonds which are linked to those pesky mortgage rates. It’s a chain reaction.
Should I buy? Should I sell?
The answer is yes to all the above. There is still a shortage of homes on the market (meaning that there are more buyers than inventory) and rents are still going up (hello investors).
Real estate is one of the best investments you can make no matter what market there is.
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