Is Stock Market Ready to Make a Move? If so, it could impact real estate. The stock market has been buoyed by the fact money is cheap and there’s not been a better place to get a return. People will be surprised to learn that interest rates have been ticking up. Borrowing costs could go higher, and when they do, this could change the landscape of the stock market.
Will this translate into money flowing into Main Street like it has in past? It could mean money going into bonds. Money could flow into real estate from investors and REIT’s (Real Estate Investment Trusts) but it will also hurt average home buyers that will see their borrowing costs go up.
The same home at the same price will now cost more. Let’s say a borrower is purchasing a $200,000 home and putting 10% down. at 3.75% interest the principal and interest portion of the payment would be $833.61. If rates rise to 4% the payment increases to $859.35. That’s a difference of $25.74. Over 30 years that adds up to $6,692.40 a 1/4% rate hike costs borrowers purchasing power.
This can adversely affect sellers too. As a seller you never want borrowers purchasing power to be diminished. The bottom line for buyers is they should seriously think about buying sooner rather than later. Prices are rising and so are rates. Even if prices stayed same, it will cost money to wait.
Over the next few days the stock market may rise and fall. We’d expect it might fall but you never know. What is certain is the government has stopped buying down rates, and rates will go up. How you react will affect your buying power, and today your buying power may be better than it is in the future.