Reasons Not to Fear Your Interest Rate
There seems to be an underground current of panic streaking through the real estate industry because the insanely incredible interest rates that buyers and people refinancing have been enjoying went up approximately 1% to another record-low interest rate that is hovering around 4.58%. It seems that once people develop a “comfort zone” of the way things are supposed to be for the faltering real estate industry, even small changes will have some real estate professionals and many buyers “running for the hills,” so to speak. However, there is certainly no need to panic because out of what seems to be the beginning of rising interest rates, inflation, and the stagnation of the construction industry’s recovery, there are several opportunities for buyers, sellers, builders, and Realtors – it’s a win, win…win, win!! Stay with me, and you will see why:
1. Fence Sitters Just Got Their Push
With the rise of interest rates, no matter how small, this has seemed to push those people waiting for the rates to “bottom out,” to jump off of the fence and close on their home purchase or their refinance. And, the increase in interest rate is approximately 1% to bring the interest rate up to another historically (or hysterically) low interest rate. Also, it is still feasible for those loan holders who had 6% – 8% interest rates on their 30-year fixed loans to want to refinance to a lower rate as well as a shorter term loan. There is still plenty of refinance business to be had for banks and lenders alike.
2. Builder Confidence
In conjunction with the rise in interest rates, there has been an increase in builder confidence to 59, the highest it has been since the start of the Recession. Builders are seeing a lower supply of homes on the market, which in turn means less inventory for buyers to choose from, which means that builders need to build more homes. There is nothing better for a builder to hear than there is a shortage of homes on the market. There is still some pessimism in the stock market, but the The Standard & Poor’s Supercomposite Homebuilding Index is known for erring on the side of caution when it comes to Recession numbers.
3. Interest is Increasing, While Consumer Interest Is on the Rise
Builders are not seeing the significant jump in sales and the “cause and effect response” of an increase in building permits and new construction starts. The reason for this is how badly burned builders were during the “no sales” years of the Recession. They are hesitant to get out there and start building homes until they are absolutely sure they aren’t “going for the fall” again. Because of this, the number of homes for sale and new homes that have been completed and are standing empty (inventory or spec homes) has decreased from July to August, leaving buyers with fewer choices and fewer purchases. Builders need to understand that the over year’s supply inventory of homes is a fact of the past, and the real estate market is about to run out of product, so they need to get building!
4. One Increase Does Not Equal Another
There is great fear in the market that interest rates will rise, home prices will rise, and the housing recovery will stall. It is true that home price increases have been setting records all over the board since the beginning of 2013, however, just like the housing bubble, these high prices are unsustainable and many experts are seeing a stabilization of home pricing across the board. Therefore, with interest rates gradually going up, there will not be high home prices to make affordability of home payments extinct for prospective home buyers.
5. With Employment Comes a Purchase?
With the lack of new homes for sale (standing inventory), the “fence-sitters” jumping off of the fence to scoop up the remaining resale inventory on the market, and builders understanding the need for more homes to be built, now is the perfect time for those who were forced out of construction jobs to jump back into the business with both feet. Builders are even commenting how it is difficult to find a full crew of sub-contractors for all aspects of their houses because people who used to work in the industry had to find work elsewhere in other industries and trades. With construction workers becoming employed again, they too will join the minions of buyers interested in purchasing one the remaining homes for sale in the dwindling inventory of the real estate market.
Here at Bedico Creek, we are adding builders and new homes for sale each month at a steady pace. At the same steady pace, we are seeing these homes go under contract. If you are making a decision about buying a new home, check out Bedico Creek Preserve in Madisonville, Louisiana. You won’t be disappointed! Call 985-845-4200 or E-mail [email protected].
