Don’t Let Interest Rate Fluctuations Stop You

We’ve noticed a serious slow-down in buying and selling in the last three weeks.  The exuberance of the first and second quarter has given way to tightened inventory in the third quarter, while interest rates climb.

The problem is that the rise in interest rates has scared a lot of people, even though rates are still really low.

I want to share these three graphs with you. The first is the movement in the 30-yr fixed interest rate. See that shift upward over this year? Its really only one percentage point.
 You can see more here:

http://www.freddiemac.com/pmms/pmms30.htm
http://research.stlouisfed.org/fred2/graph/?g=lHz

So, why the shock? Its like the effect that a dollar increase in gas has on driving: it makes people pause and think about their future plans.

Check out the other two graphs from the Cromford Report, below. They are of the 3-month and 12-month moving averages for homes in the CenPho area, which make up the majority of the sales ($100k to $600k). See how the price per square foot continues to rise in CenPho?

By the way, the higher interest rates I believe mean less chance of a bubble, which was slim anyway.

So, here’s the challenge and the opportunity:

1) If you want to be located in the central valley, you are in competition with people for a small supply of homes. The interest rates will cause a pause, but people will realize that 5% is still really low and they will continue to buy.

2) The opportunity comes in those homes where the sellers listed too high thinking they could make take advantage of that exuberance (which they don’t realize is gone). 

3) If you are thinking to sell, keep an eye on interest rates, but don’t get wedded to them. The tight inventory will have more of an affect on sales success, but if they continue to rise, it could dampen the market.

Please let me know if you have other questions.  I can help you buy or sell your home. Please give me a call at 602-456-9388.