“Interest”-ing News for Real Estate

We are in the final weeks of 2016, and conventional wisdom in real estate pegs this time of year as “the dead zone.” With holidays and shopping and travel and family time and cold, wet weather and winter breaks from school…massive financial transactions involving homes tend to go on the back burner for a lot of people. As the clock ticks down to the new year, interest in real estate in general tends to be quite low.

Interest, You Say?

Interest Chart from the Wall Street Journal
Interest Chart from the Wall Street Journal

Let’s put aside conventional wisdom for a moment. Some huge financial news hit the presses this week: the Fed not only raised rates for the first time this year, they also anticipate raising them multiple times in 2017. This reaction reflects tremendous optimism about the U.S. economy in the near future. It also has massive repercussions for the real estate market. All of a sudden, the end of the year has become an absolutely crucial time in anticipation of this news coming to pass.

As the Fed raises rates, so too raise the monthly interest rates people will have to pay for their loans…like, for example, their mortgages. All of a sudden, a new home buyer’s monthly payment is higher than it would have been a month ago, and as the rates continue to climb, so will their payment amounts. Budgets will need to be recalculated, and what was once within reach for some people may simply slip out of it.

So what does this mean for real estate? In short: the time to sell is now! As interest rates rise up, the buyers who were able to afford higher loans and more expensive homes are going to be looking for homes of lesser value. Affordability, already a massive concern in the Bay Area, will become even more paramount. Which means this: if you have a home to sell, now could very well be the time to put it on the market. Right now there is the maximum amount of buyers for the foreseeable future-before rising interest rates start forcing people to change their plans-which means increased competition and, ideally, higher prices.

This is not to say it isn’t the right time to buy, either; quite the contrary! Delaying purchasing a home at this point means being subject to ever-increasing interest rates. And since, as we noted earlier, the multitude of December happenings oftentimes distracts people from real estate, now could be the best possible time to buy a home, when competition and interest rates are both at a low.

Bottom line: right now is the time to buy or sell. At the very least, take a moment to reevaluate your own short-term and long-term real estate goals with this information in mind. Those who act quickly in light of this recent news will be well-positioned in 2017 and beyond.

For more information about the raise in interest rates and how it affects you, please feel free to call me at (408)  836-6369 or email me at ejohal@kw.com. I will be happy to help guide you through whatever questions you may have.