Rising interest rates costs buyers money when purchasing a home. It either increases their payment, or it decreases the amount of purchase to maintain the same payment. Buyers have been warned for some time that rates would go up, and now they’re listening. Buyers flock to beat 2018 interest rate increases in 2018.
If you want to see where rates are headed, one indicator we look at is oil prices. As the economy improves, countries consume more oil. As oil consumption increases, it raises the cost of oil. Simple supply and demand. As oil prices increase, it raises the cost of inflation because so many things are tied to oil. Transportation costs increase, so not only does it cost you more to fill up your car with gas, it also costs companies more to move their product.
Lumber goes up because there is more demand for building plus it costs more to cut it and move it due to oil. Food prices go up because it costs more to plow the fields, and transport groceries to warehouses and eventually the stores. Postage goes up as Fed Ex, UPS, and the USPS pay more to deliver mail and packages. Oil influences a lot of things.
As you can see from the graph, oil futures have been increasing since June of 2017. The 10 yr treasury yield has been increasing since September 2017. Oil price and interest rates are closely tied as they feed off each other. Oil signifies inflation may rise, and inflation rises, so typically does interest rates.
Mortgages are most closely associated with the 10 Yr treasury yield. Perhaps this is because not all mortgages remain for 15 years or 30 years. The average homeowner typically sells and purchases another home before their mortgage is paid off.
Buyers Flock to Beat 2018 Interest Rate Increases
If you’re on the fence about when to purchase, the recent rise in interest rates may make you move sooner rather than waiting. Even if you own a home, it may be a good time to sell and purchase that next home.
If you sell now, you have more available buyers for your home. As rates rise, you will lose buyers to the increased costs. And, you’ll save when you buy your next home too. Not only will you qualify for more home today than when rates rise, you’ll also pay less when rates are lower.
Presumably you’ll get a higher sale now with more qualified buyers than you might with less qualified buyers later, and you’ll save money on the next mortgage. It’s a double win-win for a seller contemplating a move. Sure, home prices may still go higher, so it’s not automatic you’ll get more for your home today. We’re just saying there will be less competition from other sellers now and more demand from buyers now than when rates rise. It’s always more fun to sell when you’re holding more of the cards.
Rates have already begun to rise, so sellers aren’t holding all the cards they were 6 months ago. We are seeing more inventory, which in a way is good thing because now sellers have more options when they decide to move. Many sellers wouldn’t sell because they had no idea on where they’d go. That’s opened up just a bit, which helps.
Always work with an experienced agent who knows the market. If you’d like to search the MLS for Free like a pro, go to www.LeeCountyOnline.com It has all the listings and is updated instantly. No more wasting your time on properties that sold months ago. And you’ll see all the new listings instantly too.
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