Yesterday, June 13, 2018, the Fed raised rates by .25% and said there was a strong possibility of two more rate hikes this year. In mortgage land we always gasp when the fed raises rates primarily because we know we will be fielding 20 calls of buyers who think they now will be priced out of the market forever. My last night consisted of repeating the same phrase over and over “Have a glass of delicious California Chardonnay, it’s going to be ok I promise.” Yes, California grape growers and wineries “I got your back”.
Personally, every time they raise the rate I do a little dance because it gets me one step closer to my fantasy of having interest on my money pay my mortgage. Forget the Louboutin boots and Jimmy Choo sandals I want interest on my money paying my mortgage. There are many people with this same fantasy. It is a very conservative investors dream. This is important.
Buyers you are going to be OK. As the rates climb the housing prices will cool because with every increase a chunk of buyers for each home falls out due to affordability. As investors start to be able to make money on their money by keeping it in more traditional investments you will stop seeing all the rampant cash offers that have pushed the market up so high in many areas around the country. Investors have been throwing cash at homes because that was one of the safer places to make money over the last 5 years. As the rates increase this should dissipate which will lessen your competition and give you a better chance of securing your “dream home.”
Sellers, the time is now to list your home. Stop dawdling. You have made a fortune in the last 5 years, cash out now. If you think if you hang on for one more year you will make another 10% in equity you are most likely wrong. Reread the buyers paragraph above that affects you.
Sellers: Your equity is at a peak and with every rate increase you lose a chunk of potential buyers. List now. And by the way, nothing is better with a listing agreement then a delicious glass of California sparkling wine. Congrats on your new listing!
Buyers: Take your time and find your home. Yes, you may have a higher interest rate but the house you are buying may be less expensive than originally thought. Remember you are nowhere near the 80’s and even in the 80’s people bought houses. Now have a glass of that delicious Sonoma Coast Pinot Noir, or Napa Cabernet.
For more on the rate hike that has much more detailed info check out