|Redondo Beach 2 on a lot Townhouse|
So the big news is that the Federal Reserve finally raised interest rates. Some people think it is overdue while others think it is premature. Either way, now a done deal and the question I'm getting from both Buyers and Sellers is "How will this affect Real Estate?" or more precisely their home values in Redondo Beach or their purchasing power.
Obviously this is going to affect people differently depending on their personal situation.
In the short term, Sellers may well benefit as we go into the peak selling season and buyers try to lock in properties before rates go up further - and they will. I would also predict that many Buyers will substitute 7 and 10 year ARMS for fixed rate products. There will be some buyers who will be priced out of the market because they were already qualifying based on lower ARM rates. Also we are less likely to see the runaway price wars of the past few years. Here's why. When Buyers could offer $25K, $50K or even $100K over the asking price and their payment went up in the hundreds, people would do it in order to get the home they want and not chase the market up. With higher rates, we'll see less of that. And it is pretty doubtful that we'll see rates go up a point and property values go up another $100K. There's just not that much headroom.
If you will be buying in 2016, best to jump in before rates go up even more. The "deal" right now is getting into escrow. Even a quarter point jump could cost you tens of thousands extra over the course of your mortgage.
If you are a home owner and not thinking of moving but have an adjustable rate mortgage, you might want to consider refinancing into a fixed rate even if it is higher in the short term. If you wait to refi, it may cost you in the long run.