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  • Rising Interest Rates

    Wednesday, February 6, 2019   /   by Holly Northup

    Rising Interest Rates

    Interest rates and the real estate market continue to be the hot topics these days as we continue down the road of 2015.

    For years (1987-2006), Alan Greenspan was the name to know when it came to the Federal Reserve System and what interest rates were expected to do.   These days we need to know a new name.

    Janet Yellen took office as Chair of the Board of Governors of the Federal Reserve System on February 3, 2014, for a four-year term ending February 3, 2018.  She is by far the most important person in our nations’ financial world today and is basically in charge of the future of mortgage interest rates.

    Even though mortgage interest rates dipped to 3.78% last week, rates are still expected to rise…and soon.

    In fact, the Federal Reserve issued a warning this past Wednesday that interest rates will rise – it doesn’t get much clearer than that.

    This rise of mortgage interest rates is mostly due to the stabilization of the economy and the significant rebound of the collapsed housing market since the 2008 recession.  Add lower gas prices, lower unemployment rates and higher minimum wage and you’ve got a recipe for higher interest rates across the board.

    With economic recovery comes a whole set of other issues.

    According to Realtor.com, with all of these positive forecasts and the fact that consumers are feeling more confident about the future, interest rates are sure to rise. Many economists expect the Federal Reserve to take action as early as June and some economists predict a jump in interest rates in October.

    The bottom line remains the same…interest rates are no longer going to be in the record low department and the reality is that rates are now subject to erratic changes.

    The best advice for those looking to buy a home in the near future is to lock in a rate as soon as possible to be guaranteed a lower rate.

    While Austin is not in the top five markets for housing unaffordability – No. 1 is San Francisco, followed by San Diego, Los Angeles, New York City, and Miami, according to a report from the National Association of Realtors® – Austin is seeing a lack of housing inventory and higher prices.

    This is great for sellers, but not so great for buyers.

    On the national scale, the NAR report stated that existing-home sales increased 4.7% year over year, and as of February 2015, the median home price had risen 7.5%, to $202,600, from February 2014, indicating the 36th consecutive month of price gains.

    Additionally, the report found that by the end of 2015 “even middle-of-the-road housing costs will come dangerously close to the line dividing affordable from unaffordable. The median household income of $55,533 will just fall short, spending 27.6% of income annually on a median-priced home purchased with a 30-year fixed-rate mortgage; while renters will tip over the line, handing over 29.5% of their income for housing.”

    The problem with affordability in Austin – like many other areas across the nation – is that renting is definitely not the solution to increasing mortgage rates and housing prices since the rent-to-income ratio has continued to rise in the same areas where the housing prices have risen.

    Information is power, so let the Bucher Group help you negotiate through this sea of change in the housing market!  We have a long history of working through the fluctuating real estate market and we have the expertise to give you the best advice!

    If you or someone you know is interested in buying or selling real estate in the Austin area, please contact Kathleen Bucher at 512.794.6644 or KathleenBucher@mac.com.  It would be an honor to earn your business!