How the Fed’s Recent Rate Hike Impacts Our Market

The Fed’s recent rate hike shouldn’t have any significant impact on our market. In fact, it might actually stimulate it.

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On June 14th, the Federal Reserve increased its federal funds interest rate by 0.25%. They’re also widely expected to raise rates once or twice more over the course of 2017. What does this mean for the real estate market?

While any action by the Fed always garners a lot of attention, I believe these increases will not have any significant impact on our market.

First of all, mortgage rates have actually trended lower in the wake of the Fed’s recent announcement. The 30-year mortgage rate recently hit 3.9%, the lowest level in 2017. In fact, it’s a common pattern for the mortgage rate and the Fed rate to move in opposite directions, and the same thing has happened the last two times the Fed raised rates.

Second, the economy continues to do well. The Fed decided to increase its rate because unemployment and inflation are low, household spending is picking up, and we’ve seen steady growth for the past nine years. This is good news for the real estate market. As expected, we continue to see strong demand and a corresponding increase in home prices.

Third, while the Fed’s rate increase is normally meant to cool off the economy, it might actually stimulate it in this case. Because interest rates were so low for such a long period of time, experts believe the recent increases might ease pressure on the financial system and encourage lending.

Case in point: since the Fed started raising its rate in December 2016, total mortgages are up 2.5% year over year.

In conclusion, while any move by the Fed is likely to lead to a lot of hand-wringing, I believe the real estate market will not be affected and will continue on its own healthy course. Nonetheless, it’s clear that right now is a uniquely good moment for everyone in the real estate market. Today’s low mortgage rates are good for homebuyers because they make homes more affordable.

If you have any questions about our market or you’re thinking of buying or selling a home, give me a call at 408-857-8511 or send me an email at Nakul@NakulKapoor.com. I’d love to help.

The Perfect Storm for Home Sellers Is on the Horizon

This summer is shaping up to be the perfect storm for home sellers in our market. However, you need to act fast.

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If you’ve been considering selling your home, now is the time to do it. This summer is shaping up to be one of the most favorable seasons in recent years to sell your home quickly and for top dollar.

However, this moment won’t last forever.

Mortgage rates are still very low. Right now, the 30-year mortgage rate has dipped to 3.9%, which is far from the 4.5% experts predicted for 2017. These continuing low mortgage rates translate into more affordable homes and eager buyers looking to lock in these low rates while they last.

We’ve seen this eagerness in action lately. Demand is so strong that home sales actually increased in both April and May, despite the fact that the supply of homes on the market is currently at a seven-year low. As a result of strong demand and tight inventory, home prices reached a record high this May, rising 6% compared to May 2016. It was the 63rd straight month of year-over-year gains.

What does this mean for you?

These conditions make it very easy for you to sell your home right away for a very favorable price, but they also point to a correction which might appear soon in our market. For example, the increase in sales numbers is likely to push up mortgage rates, making it less affordable for buyers to buy. The ongoing Federal Reserve rate hike might contribute to this as well.

If you’re thinking of selling your home, the time to do so is now.

Furthermore, the continuing demand and high home prices will eventually spur construction of new homes. The record-high confidence levels reported recently the National Association of Homebuilders support this. All this new construction will certainly impact the growth of home prices, and might even drive them down.

So, again, if you’re thinking of selling your home, the time to do so is now.

If you have any questions about our current market or need help getting started on selling your home quickly and for top dollar, don’t hesitate to give me a call at 408-857-8511  or send me an email at Nakul@NakulKapoor.com. I’d be happy to help.

3 Ways the Brexit Is Affecting Bay Area Home Prices

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The United Kingdom’s withdrawal from the European Union - or “Brexit,” if you will - has had an effect on stock prices, gold, and government bonds. More importantly, though, it has also had an effect on real estate prices in the Bay Area.

The yield on the 10-year treasury has been tumbling ever since the Brexit. That, in essence, has caused lower mortgage rates. We’ve also seen an uptick in both home purchase applications and refinance applications, signifying a major increase in housing demand.

The other upside we see is foreign investor interest. The U.S. dollar is holding strong and proving to be a better investment than the British pound. Another thing that analysts are pointing out is that there may be a tech and real estate withdrawal from the United Kingdom, which would help the U.S. market in terms of job growth and demand for homes.

To conclude, the three effects the Brexit has had on home prices are lower mortgage rates, an increase of foreign interest, and potential job creation. All these signify increased demand and a very healthy scenario for real estate.

If you have any questions or you’re thinking about buying or selling real estate, please give me a call or send me an email and we’ll schedule a free consultation.