To all the agents in the house,
"I'm very frazzled this week," a real estate agent texted me Thursday. "Rates are causing panic."
The Federal Reserve's Federal Open Markets Committee Wednesday raised the federal funds interest rate — the rate which the committee suggests commercial banks charge for overnight lending — by .75% to 1.50 to 1.75%. It was the largest such rate increase since 1994 — and additional rate hikes are expected this year.
How will it affect real estate? That remains to be seen.
As my colleague Flavia Furlan Nunes reported, Jerome Powell, chairman of the Federal Reserve, said Wednesday regarding the housing market: "Prices may keep going up for a while even when rates are up. So it's a complicated situation. We need to get back to a place where supply and demand are back together and when inflation is low again."
Indeed, some agents are heartened by the Federal Reserve's actions.
"We might be turning back to a normal, healthy market," said Robert Sarkisian, principal broker at Berkshire Hathaway Home Services' Island Properties in Nantucket, Massachusetts. "The pendulum has to swing back to the center."
But although they're intended to compress demand, increased interest rates could accelerate the escalating number of cash buyers, in turn pricing out first-time homebuyers who cannot pay cash.
Rising or falling interest rates also can't change the fact there remain more interested homebuyers than available homes for sale.
As RealTrends' Brooklee Han reported Tuesday, there are a few more Multiple Listings Service listings than at this time last year. But it's still, decisively, a seller's market. Meanwhile, the seasonally adjusted annual rate of the number of homes starting to be built actually declined 14% in May, compared to April, according to a monthly federal government report.
Agents, what changes are you seeing right now, and what concerns do you have going forward? Please email me anonymously at mblake@housingiwre.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
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