What the Trump Tantrum Means to You

How has the election affected the housing market? I’ll go over what the Trump tantrum mortgage rate increase means for real estate.

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After the election, interest rates jumped from 3.77% to 3.95%. So, how has the Trump tantrum mortgage rate increase affected the market?

Historically low interest rates have really helped buyers in the real estate market this year. Home prices went up, and multiple offer situations were incredibly common. However, because of low interest rates, buyers could still afford to get into a home for a low monthly payment.

According to Inman, economists say the anticipation of President-elect Trump promised spending plans and tax cuts have investors preparing for inflation and a dose of adrenaline to the economy. As a result, there has been some market volatility over the last couple of weeks.

It’s important to keep in mind that the interest rate at this time last year for a 30-year fixed mortgage was 3.97%. So, even after the recent rate jump, rates are still historically low. If you are thinking of buying a home, you’ve probably heard people say that rates will continue to go up in the months ahead. Now that interest rates have increased, more buyers are jumping into the market before they go up again.

Although the Fed will proceed cautiously, it’s been reported that interest rates will almost certainly continue to rise in 2017 and over the next few years. Economists have predicted interest rates to be at 4.5% by the middle of year, with a possible rise to 5% by the end of the year. So don’t panic, as the rate growth will be gradual. However, if you buy a home now instead of waiting until next summer, you could save thousands of dollars over the life of your mortgage by locking into a low interest rate.

Sellers need to keep in mind that every 1% increase in interest rates eliminates 30% of the buyers able to purchase your home. Conversely, buyers need to keep in mind that every 1% increase in interest rates can reduce borrowing power by 11%, which is huge. So, if you are deciding between buying now or waiting, now is the best option.

Keep in mind that interest rates are still incredibly low. In fact, during the market boom, 6% was considered a great interest rate. Even if they do rise to 4.5% by midyear, rates will still be historically low. No one can see the future, but it does seem like it’s time for the real estate market to see some increases in rates.

If you have any questions about interest rates or our real estate market, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.

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