This is an excellent post with great information. Thanks for sharing it.
Have a super fantastic week!
Joe Jackson, Realtor-KWCP
In recent weeks, the Federal Reserve raised the standard interest rate seventy-five basis points or 0.75%. Headline news in most economic and business journals, the immediate impact on the housing market was less notable. Though with the Fed projected to raise rates again in September, we are watching the trends closely to ensure we provide the best, most updated guidance for our clients.
First, it’s important to understand that the standard interest rate is not the same as a mortgage interest rate. Though the choices the Fed makes do impact interest rates, there is a lot more that goes into the rate you get for your loan than that. Typically, when the Fed raises interest rates, mortgage interest rates do increase. However, that isn’t always true and in recent weeks, we have seen mortgage rates decrease slightly. Good news for prospective home buyers! The lower your interest rate, the more buying power you have. Though with rampant growth in consumer prices affecting nearly every sector of life and home prices on Long Island sitting near record highs, dollars don’t stretch as far as they used to.
Concerns about escalating costs are the driving force behind the Fed’s recent decision to step in and raise rates to try to curb inflation. Economic indicators show that it does appear to be working – though perhaps not quickly enough. The August 5th report from the Labor Department showed that consumer prices only rose “8.5% in the 12 months through July, down from the 9.1% increase in the year to June that had marked the highest inflation rate since 1981.” That opens the door for another similar rate hike in September. According to a recent article from Reuters, “Chicago Fed President Charles Evans said he believes the Fed will likely need to lift its policy rate to 3.25%-3.5% this year and to 3.75%-4% by the end of next year, in line with what Fed Chair Jerome Powell signaled after the Fed's latest meeting in July.”
If you’re planning to buy a home on Long Island before the end of the year, or sell, it’s important you have all the facts to guide your decision-making. We likely will see a slight to moderate increase in interest rates off the back of all this movement from the Federal Reserve. However, with buyer demand still strong, it’s unlikely to deal a strong blow to the Long Island housing market.
What we’re likely to see is a doubling-down on the shifts we’re already noticing in the market: homes taking longer to sell, increased price reductions, and less of the frenzy that has been the reality here since mid-2020. Buyers will continue offering on homes and properties will still change hands. Just don’t expect record-setting prices for every home sale. We are traveling towards a more normal housing market, something we haven’t really seen here on Long Island since 2019.
There are steps you can take to set yourself up for success in the changing market. For buyers, partnering with an experienced real estate team that gets proven results will be key. You’ll also want to consult with a great lender who help you explore all your options, so you get the best possible rate for your loan. Finally, a little patience still goes a long way. In an adjusting market, some sellers may need time to come to terms with the new market value of their property. Persistence and expert negotiation will matter more than ever. You’ll also want to make a move sooner rather than later so you can lock in a great rate. Now is the time to get really clear on what you must have in your next home and what you’re willing to improve or modify after closing.
For sellers, pricing your home correctly from the start is critically important. Listing your home too high increases the chances your property may sit on the market. While we are heading toward the traditional “second wave of real estate” activity on Long Island, the fall market won’t last forever. Partner with a great agent, be realistic with your expectations, and be open to working with the other side to ensure you get a great price for your home. We bring years of experience and out-of-the-box marketing tactics to every home sale and many of our clients have sold for record-high prices in their neighborhoods, no matter what is going on with the economy.
Let us show you what we can do to make your Long Island purchase or home sale a success. Click here to get in touch with us or give us a call anytime to get connected with our award-winning team!