Up, up, up! Interest Rates AND home prices
Posted May 9, 2022 in Real Estate Trends
Happy Mother’s Day to my Mom, wife and all mothers on Earth and in heaven!
As I write this column, reactions are coming in to the largest interest rate increase by the Federal Reserve Bank in 20 years—that is what happened in real estate this week.
Wednesday, right after the Fed’s increase, the stock market went up more in a day than it had in 20 years, and I started my column as “ho-hum, more of the same.” The next day, it dropped just as much. I had to start revising.
Where will inflation, mortgage rate increases and rising home prices take us? Will the local real estate market continue to be strong? My crystal ball is a little cloudy, but I’m bullish both in the short term and looking further out. First, the Federal Reserve rate does not translate directly to mortgage interest rates. Just because “the Fed” raised rates by a half-percent does not mean that mortgages will automatically increase by that same amount—some of the recent Fed increase had already been factored into a mortgage rate quote you obtained last month.
In addition, the overall strength of the real estate market means that, even if some buyers cannot afford a home due to higher mortgage rates, there are many other buyers remaining. It is disappointing to see some buyers forced out of the market and others getting less for their money, but demand is so high that sales are continuing to happen. No one that I have heard is predicting an end to strong buyer demand—we need houses.
If you think 5% or 6% interest is high, remember that if you are a renter 100% of your rent payment is interest. You have gained no equity after a year or even ten years of payments. Buying and owning real estate is one of the best ways to hedge against inflation and to build personal wealth. The value of your real estate assets rises, while the value of a dollar sitting idle goes down. Median home prices have risen over 14% in the last year, greatly outpacing inflation.
At Clark County Title, we celebrate the opportunity to assist homebuyers to get into the American Dream of homeownership. We are also gratified to help sellers “cash in” when it is time to sell their investments. We have been able to create the best title company in town by providing the best service to Realtors lenders, buyers and sellers. We have combined today’s tech solutions with warm, personal service.
Next time you are buying or selling real estate, call or email! Clark County Title wants to be part of your real estate plan!
Happy Mother’s Day from your friends at Clark County Title,