Staggering inflation rocks financial markets this past week essentially forcing the Fed’s hand going forward. This caused interest rates to skyrocket to over 6.625% for well qualified buyers, up from about 5.375% the week prior.
We are writing this article before the Fed makes its decision on rates. Some believe the Fed will raise rates 75 basis points while other believe 100 is in order. Essentially the overall market has priced in the anticipated Fed decision.
Of course, the stock market reacted negatively because rising rates is not good for earnings, which will impact stock prices. The yield curve on the 10-year note and 2-year note inverted again this week briefly, which signifies what we saw earlier in the year. The financial markets believe we are headed for recession. The Fed will be forced to put us into a recession to curb demand and get inflation under control.
Experts disagree on how high rates need to go to curb demand. As oil continues to rise it adds inflationary pressure to everything, so getting oil prices under control is crucial. Failing that, the Fed’s job will be much tougher. As we write this article oil prices are at $123.50/barrel. Many believe it will go to $150, and if it does, the Fed may need to raise rates significantly more throughout the year.
None of this is good for the financial markets, and it’s not good for real estate either, in the short run. In the long run we know real estate holds up as a hedge against inflation. Home prices long term outpace inflation, and we have written an article on that. See our post from May 26th Housing Best Hedge Against Inflation in Uncertain Times which covers that.
The game plan for buyers right now is get in before interest rates rise further, as rising rates will cost you much more than a possible price decrease from sellers in the short term. See our video from April 15th Better to Buy Now or Wait? on our YouTube channel https://www.youtube.com/Topagent which shows you exactly how much it costs by waiting in a rising rate environment.
We have been predicting this day for the past several months and advising our clients. There are no surprises for the informed. We always say, hiring the right Realtor makes all the difference, especially in a shifting market. What you do next will determine your financial future.
If you are thinking of selling, knowing the latest statistics will help. You must price your home for the market we are in and for the market we are going into. Some sellers are holding on to the market from 3 months ago, and those strategies may not work. Gone are the days of throwing up a listing and expecting 20 multiple cash offers. You may need to look at financed offers and appraisals.
If you are a buyer, you may want to get ahead of this. More listings are coming on the market to choose from, and waiting can seriously cost you. If you see a home that meets your needs and is priced correctly, you may want to make your move. Waiting for a seller to reduce their price 5% might cost you 15%. This is what we just witnessed this past week. Waiting absolutely cost financed buyers.
Our team is not here to sell you anything. We present the facts and let you make the decisions. We do so in a factual and logical way so you can make the best decisions for your family. Most people appreciate the truth, and that’s just what you’ll get when you work with our team. If you’re thinking of selling, talk to Brett or Sande Ellis 239-310-6500 or visit www.SWFLhomevalues.com
If you’d like to buy before rates go up again, visit www.LeeCountyOnline.com or call us at 239-489-4042. We’re here to help. Remember, when the markets get rocked, stay calm and work with a professional.