With interest rates rising to their highest level since July 2015, and the speculation that the Federal Reserve will raise interest rates when they meet on December 14th, some buyers got off the fence about buying.
“Rates on mortgages and home equity lines of credit will likely increase if the Federal Reserve increases the prime rate as expected in December,” said Martin Lopez, mortgage coach and author at iServe Residential Lending. “The Fed may increase that base rate at least once if not twice during 2017.”
A 1% rise in interest rates equates to a 10% loss in buying power. It looks like mortgage rates could be above 5% by mid 2017. To me that is still a good rate, when I first entered real estate in 1984, fixed rate loans were over 18%!
In addition, according to CoreLogic, the median price in San Diego County reached $507,500, up 11 percent from a year ago. It has still not reached the housing boom peak of $517,500 in November 2005.
The rise in rates from 3.5% to over 4% plays out like this:
If you are a Buyer, and qualified for a $600K mortgage at 3.5% – a 4% that loan amount dropped to $570K. If you are a Seller who has your home listed at $600K, less people can afford it today. The bottom line – If your thinking of Buying, you buying power may never be better! If you are thinking of Selling, more buyers can afford your home today, than possibly tomorrow!