Unless you’ve been living under a rock, you’ve probably heard about our rising interest rates. I’ve recently talked with a few clients who want to know more about what interest rates are and why they’re important, so today I want to explain what you need to know about rising rates.
Just like most things, there are positives and negatives to higher interest rates. Essentially, interest rates are the rate at which money is borrowed, so if you have money in the bank, higher rates mean you’re earning more interest. However, if you need to borrow money, your interest will be greater. As you probably know, most people borrow money to purchase their homes, so as interest rates increase, so will the cost of buying a house.
A lot of people are worried about our increasing rates, but it’s important to look at things from a historical perspective. The average historical interest rate is just above 7%. When my parents purchased their first home in 1980, their interest rate was around 16%! Right now, our rates are around 5%, so even though they aren’t astronomically low like they used to be, they’re still good.
“Home prices aren’t falling anytime soon.”
If you check out the chart in the video at 2:14, you can see our interest rates from the last 50 years or so. They peaked in the 1980s at 18.63%, and they hit their all-time low in 2021 at 2.65%.
So how will increasing rates affect our market? Some people think home prices will plummet, but I highly doubt it. Prices may not increase at the same breakneck pace we’ve seen recently, but as long as inventory remains as low as it is currently, prices won’t drop. If you’re looking to buy a home, you may want to move sooner rather than later. Interest rates will increase further, and prices will continue to rise. The sooner you buy a home, the less expensive it will be.
If you have questions about today’s topic or anything else related to real estate, please call or email me. I look forward to hearing from you!