It has been about three weeks since The U.S. Federal Reserve executed a much-anticipated interest rate increase. The March interest rate hike of 0.25% was planned for quite a while, but it still has buyers groaning. That’s because even a fraction of a percent can translate into thousands of dollars for the typical home buyer. So it’s clear that many — particular sellers who have their home listed on the open market — may be wondering precisely how this hike, albeit a modest one, as impacted the real estate market as a whole. That’s exactly what Southern Connecticut Coldwell Banker Realtor Judy Szablak will explore in today’s article.
What Spurred the Increase and What is the Current Interest Rate?
It was on March 15, 2017 when The U.S. Federal Reserve increased interest rates from 0.50% to 0.75%. This move was very much expected as The Fed has made its intentions very clear: it will launch a series of small rate hikes over the next couple years. The goal is to raise the interest rate three more times, arriving at 1.5% by the end of 2017. Then, the gradual hikes will continue through 2018, bringing the rate to 2.0%. In 2019, the rate will arrive at 3.0%.
Of course, this assumes the economy remains on its current trajectory. Any major economic upheaval would likely prompt The Federal Reserve to back off its rate hikes, which are used as a mechanism to control inflation. In times of economic contraction, The Fed lowers interest rates to promote borrowing in an effort to help give the economy a jump start. When the economy grows and begins to thrive, The Fed increases rates to prevent inflation. So while it’s bad news for borrowers when the interest rates rise, it can be good news overall since it means that the economy is in a good place.
Plus, individuals who earn interest on their savings will see greater returns. So for some, this can offset any jump in interest. And, of course, the rate hike only applies to those getting a new loan or those with a variable interest rate. There won’t be any real impact on those who already own a home and have locked in a fixed interest rate.
This most recent rate increase is just the third in approximately a decade. The interest rate was at near-zero for nearly ten years when it was increased to 0.25% in December 2015. Even when the rates reach an expected 3.0% in 2018, we’ll still be far away from the comparatively massive rates that we saw in the early 1980s when interest rates exceeded 20%! Even the late 1980s and early 1990s saw a rate that hovered around 10%. So historically speaking, rates will remain low for a long time to come.
How Has the Interest Rate Increase Impacted the Real Estate Market?
There haven’t been any reports to suggest a major flux in the real estate market since the mid-March rate increase, which is actually good news, particularly for sellers. In fact, the market has continued to trend toward a seller’s market, giving the seller a slight advantage in the equation. More and more homeowners are seeing more offers, higher offers and shorter time on the open market prior to sealing the deal.
The logic behind making fairly small interest rate increases is to minimize the “shock” to the market. And as previously touched upon, individuals who earn interest on savings accounts will actually see greater returns. So depending upon the amount you’re borrowing and the amount in your savings account, you could see little or no impact on your financials as one may offset the other.
The entire equation is actually a positive one. While we are seeing slightly higher interest rates, it doesn’t seem to be deterring buyers and it’s also a positive sign that the economy is headed in a good direction.
Trust Your Home Sale to a Top Southern Connecticut Realtor
If you think you’re ready to buy a new home or sell your existing home, there’s no better time to do it! Acting now will allow you to lock in a good interest rate. And what’s more, the spring is an ideal time to buy or sell. Southern Connecticut real estate expert and seasoned Realtor Judy Szablak is here to offer guidance, helping you avoid scams while ensuring that you enjoy a prompt, efficient transaction. An agent with Coldwell Banker Residential Brokerage, based in Westport, CT, Judy Szablak has been in the real estate field for decades. She specializes in the purchase and sale of single-family homes, new construction, luxury properties, condominiums and even seasonal or rental homes.
Serving clients since 1984 and recently amongst the top 6% of Coldwell Banker real estate agents worldwide, Realtor Judy Szablak has more than 30 years of experience working in the Southern Connecticut real estate industry. She works with clients in a number of Southern Connecticut communities, including Westport, Trumbull, Weston, Fairfield, Norwalk, Stamford, Easton, Wilton and Rowayton amongst others.
Browse Judy’s property listings to see if your new home is amongst her listings! Or, if you’re ready to sell your Southern Connecticut home, turn to the best. With over three decades of experience selling homes in this area, Judy knows exactly what it takes to ensure a smooth and stress-free home sale. Call Realtor Judy Szablak today at 203.257.5892.