How does Interest Rates Affect home prices?
Contrary to popular belief, it is statically NOT true if the Fed increases interest rates, home prices will come down. It IS true, if interest rates are increased home prices will go UP.
In August 2014, Dr. Steve Sjuggerud from Stansberry and Assoc. Investment Research wrote, “Housing rises faster than normal when the Fed raises rates. And it rises slower than normal when the fed cuts rates, and home prices tend to do better when the Fed is raising interest rates … based on data over 46 years, Take a look”
|Average Return||6 Months||1 Year||2 Years|
|Start of cutting rates||1.8%||4.7%||8.9%|
|Start of raising rates||3.7%||6.7%||13.3%|
Fear of prices or interest rates increasing is one of the factors that motivate buyers to buy a home. When the feds increase interest rates, the news media reports the change and people start to buy again. As home sales increase, inventories go down and prices go up—“Supply and Demand”.
Today, interest rates are still historically low at around 4% for both conventional loans and jumbo loans.
In San Luis Obispo County, homes are certainly selling. This year, 2014, 1,794 homes have sold with 503 homes in escrow.
Currently, there are 1,092 homes available for sale priced as low $239,000 for a condo in Templeton, CA or as high as $19,000 for a 3,500 acre range in Arroyo Grande, CA.
Inventories are high, which historically is the best time to buy. If you are a buyer and have not decided if it is time to buy, you may want to decide before interest rates increase and price go up.
Call me at 805-270-5860 and I can send you link to affordable homes you will love.
David Norwood-Central Coast Real Estate David@DNorwood.com