How the Fed Rate Hikes Provide the Best Opportunity for the Housing Market
Guest Author: Sana Ahmad (Click here for Real Estate Listings)
For the past several years, the home prices sky-rotted, due to consumer buying behavior driven by low mortgage rates and low inventory. To manage high inflation, Fed has been raising interest rates. On July 21st, Fed raised the rates again by another 75 basis point (.75). This is the third increase in a row and projections published by the Federal Open Market Committee suggest that the central bank will issue another three-quarter-point hike in November and a half-point increase in December.
Fed Chair Jerome Powell said in a Wednesday press conference that the US has had a "red-hot housing market" for much of the pandemic, and pulling prices lower will help in the Fed's fight against inflation. "What we need is supply and demand to get better aligned, so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again," the chair said. "We probably in the housing market have to go through a correction to get back to that place."
The Fed implemented changes has already had an impact, as the sales of both new and previously-owned homes slowed down, as well as prices have eased. As a Real-Estate agent, this is good new for both buyers and sellers.
For buyers, we're not seeing multiple offers or cash offers, so the buyers are best suited to find and house of their likings. At the same time, home builders are now offering more incentives to potential buyers - some are providing funds for upgrades to the house or lowering prices or even waving closing costs. Another great benefit is the long lead times to build a house has now started normalizing, which means buyers don't have to wait almost 12 - 16 months to move into their homes.
For sellers, we're now seeing that rental market has started to pick up steam. The sellers, therefore have found a constant stream of income through rental income. Many of the sellers have taken this option and continue to build an equity in the house, while at the same time have created an additional income funnel. Another option that sellers are benefiting from is by providing some incentives to potential buyers and are still able to receive the desired price of the asset.
So while many consider Fed hikes as deter ants, as a Relator, we continue to see positive outcomes for our clients. We are here to support you and I'm looking forward to helping my clients anyway I can.
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