When you tune into just about any finance news network or read an article on a finance news outlet, you’re going to see a lot of talk about interest rates. There have been several changes to federal interest rates in 2022, but we want to tackle that conversation head-on.
Unfortunately, we are hearing from many people who want to buy a home but are being scared off by all the hype surrounding “high” interest rates. We’re here to tell you: don’t let it scare you away from the market, especially during this time of the year.
Interest rates are back to “normal”
There’s no celebrating the COVID-19 pandemic. It took the lives of millions across the globe (with death tolls still rising) and cost many hard-working Americans their livelihoods. It’s been a devastating time, which is why the fed dropped interest rates to 0% or near 0% for the entirety of the pandemic.
Now that the economy is trying to crawl out of the pandemic while fighting against inflation and a potential oncoming recession, we’re seeing those rates go back up. The rates have gone up quickly, but we need to put that into perspective. If we look at historical data we see that the rate is sitting at roughly 2.33% right now which is the highest it’s been since July 2019 – only three years ago.
Historical context
In July 2019, a seasonably-adjusted annual rate of 5.39 million units were sold. That’s a steep rise from previous months at that time because interest rates were going DOWN. So, the perception at that time was that a roughly 2.4% federal interest rate meant it was time to BUY BUY BUY.
If this is the case, why would a LOWER rate of 2.33% interest scare people off? In July 2022, the number of units sold was all the way down at 4.81 million over a seasonably-adjusted annual period. That’s down nearly 6% from June when interest rates were 1.21% and down over 20% from a year ago when interest rates were near zero.
We fully understand that a lower rate means you’ll pay far less money in the long run. Ideally, interest rates could stay at the near-zero rate they sat at for much of the pandemic. For buyers, that reality is unlikely to come again until another significant shift happens in the country. In this case, it was a shift I think most buyers would rather not experience again.
Negotiating power
Another “bonus” to the higher interest rates is that it’s no longer a seller’s market or will no longer be one soon. The summer rush of home buying has come and gone and sellers lost the negotiating power of low interest rates. You can offset some of the money you lose through the higher interest rates by negotiating a lower price for the home.
This time of year is the perfect time to be on the market. You’re likely to find some gems that got lost in the shuffle of the summer rush or that weren’t listed in time for those homebuyers to show interest.
If you need help navigating the market and understanding the impact interest rates will have on your real estate search, contact Velazquez Consumer Law to help. We provide you with solutions and help shield you from surprises throughout the process.
Velazquez Consumer Law
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