All I Want For Christmas is a Higher Interest Rate

December2013-23-175x131 (Taper)So, it would appear that the honeymoon is over.

The government program that was stimulating our economy by keeping interest rates at or slightly above historic lows for the past 18 months or so could not last forever.  We knew this day would be coming.  Many believed that it would not come until Early 2014, but it seems that there was no time like the present.

“Tapering” has begun.December2013-27-175x131 (Rate Projections)

Over the next few days, weeks and months, we can expect interest rates to rise now that the U.S. government will be cutting back on their bond-purchasing program.  To the right are predictions on where interest rates can be expected to go by this time next year.  The consensus is, that by the end of 2014, interest rates will have risen by just about 1 point, which is an increase of nearly 20% from where we are now and almost 2 points higher than this past Spring.

There is no reason to panic over this.  It wasn’t so long ago that interest rates were well above 7%.  If you are thinking of selling your home, there is good news.  There is no evidence that the rise in interest rates will have a downward effect on the price gains we have enjoyed over the past 18 months throughout most of the Delaware Valley.  In fact, this information may be a boon for those considering putting their home on the market in the coming months.

WDecember2013-281-175x131 (Cost of Waiting)e can expect an influx in potential buyers in the first few months of 2014.  You see, by the end of next year, that home you were looking at may become more expensive, even if the price has not changed.  On a $250,000 home (about average for around Montgomery County) a one point change in interest rates can mean a difference of over $150/month.  Over the life of a 30-year loan, that is a difference of over $50,000 out of pocket.  I can think of a few things that I could do with that money, personally.

The Bottom Line

We all knew that there would come a day when interest rates would once again rise above where they were.  Everything, including real estate, is cyclical by nature.  If you were thinking of buying a home in the coming year, earlier will be better than later.  Now is not the time to sit on the sidelines, waiting for rates to dip back down.  While that may happen in the short-term, playing chicken with interest rates can end up costing you in the long run.

If you have been contemplating selling your home, now is the perfect time.  As of today, we are experiencing a primarily balanced market.  Home inventories are down (there are still not enough quality homes for sale to satisfy the demand) but the number of buyers has dwindled as well.  This is a seasonal shift, nothing more.  There will be an influx of buyers who don’t want to be left behind by interest rate hikes that may price them out of the perfect home for them.  Your home.  Because, the buyers will be out there.  If your home is not there for them to choose from, they will buy your neighbor’s house instead.

If you fall into either category, give me a call today to review your options and what the governmental taper will mean for you.



About Joshua Stein

They say that owning your own home is a major part of living "The American Dream." I'm proud to be an active part in making that dream a realty for the good people of the Delaware Valley as a Realtor® with Coldwell Banker Preferred's Conshohocken office. I am actively involved with the Brotherhood of Congregation Beth Or as well as a proud parent in the Greene Street Friends School community. I also served as Den Leader for my son's cub scout pack as well as a member of the Cub Pack 173 Committee in Flourtown, and now with Boy Scout Troop 665. Professionally, I also hold membership in the Montgomery County, Pennsylvania, and National Association of Realtors®. Whether you or someone you know and love are buying or selling your home, I look forward to servicing all of your real estate needs on the Main Line and beyond.

Posted on December 23, 2013, in Real Estate and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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