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The recent employment and price reports have fueled inflation fear and consequently talk of new interest rate hikes by the federal reserve have surfaced in the media. Higher interests affect the economy in many ways not the least of which is the affordability of housing. Both new home starts and existing home sales exhibit an inverse correlation with interest rates. When interest rates rise housing starts and existing home sales tend to fall. When rates fall, the opposite effect is generally seen. Then there is the old political business cycle model to consider. This model says that incumbent political parties generally pursue a policy of easy money before an election. With Clinton ahead by twenty or more points in the polls some prognosticators say that a rise in interest rates will have a minimal effect on Clinton's reelection bid.
What does this all mean to you the buyer or seller? The answer depends on what side of the fence you are on and when. Over the last several weeks I've witnessed interest rates creeping up an eighth to a quarter percent. If you are a buyer the sooner you can lock in your rate the better off you may be, assuming rates continue to increase. If you're a seller, your reservoir of buyers may shrink. As a seller, I'd take a serious look at the price of my home and make sure it is priced correctly. If you've marketed your property for more than forty-five days and the condition and location are good, reduce the price. Thanksgiving in the KC market generally signals a slowing of market activity and depending largely on weather can signal a drop off in showing activity.
As a buyer, less market activity means more motivated sellers. The marketplace functions on supply and demand. The availability, condition and location of homes in a specific price range determines how close to the asking price a particular house sells. Interest rates in and of themselves shouldn't dissuade sellers from selling or buyers from buying. The market adjusts to whatever direction the market heads. Buyers and sellers today need to seek as much information as possible before entering the marketplace.
Whether you’re thinking about buying or selling or merely seeking information, rely on me to provide accurate up to date information about the marketplace today.
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