Happy month of May! We are currently in the early phase of the peak real estate buying/selling season in Orlando. The activity came on strong, and a little earlier this year! One reason may be buyers are motivated by the fear of rising mortgage interest rates. They want to take advantage of the relatively low current interest rates. It is now north of 4% for an average 30 year mortgage, but it is expected to rise over the rest of the year.
Federal Reserve officials’ decisions on interest rates indirectly affect fixed-rate mortgages. They raised interest rates at the March meeting to a range between 0.75 percent and 1 percent, and they penciled in two more quarter-percentage point increases this year. What will actually happen depends on ongoing economic growth indicators.
How interest rate affects the real estate market, is how it affects the purchasing power of buyers. A general rule of thumb is, for every 1% rise in mortgage interest rate, the same monthly payment support 10% less home loan. For example, last year when the rate was at 3.5%, a home buyer out looking at $500,000 homes, would only be able to afford a $450,000 home when the rate hits 4.5%.
This is significant for both home buyers and sellers. It is easy to understand for home buyers because they can afford less of a home when the rates rise. But for the sellers it’s also significant because there are fewer buyers able to afford their homes given any price range.
Low interest rates have been credited as a major driving force behind the strength of the real estate market since the Recession. I hope the strength of our economy now can continue to support the health of our housing market, gradually shifting over from the low interest rate.
So, while the buyers are out in droves shopping for homes, Home sellers are taking advantage of this wave. Many of our home seller clients have been positioned early to catch this early wave of home buyers, others are coming online over the next 3 months. Most of our listings are under contract now, the rest will be by mid-summer.
If you are planning on buying or selling a home in 2017 or 2018, it’s never too early to have a conversation with us. Many of our clients today started planning with us last year.
Give us a call if you have questions, or know of someone we can help!
Until next month, take care!
Yien and the Yao Team.
