(News) Real Estate Expected To Heat Up After Increase In Interest Rates
Real Estate Interest Rates
The Federal Reserve, otherwise known as the Feds, has recently made their first interest hike in almost a decade. This ultimately means that real estate is in the limelight, as their sales are going to increase. Additionally, this means that the Feds must be confident in the economy, as job growth must also be a key reason for raising the rates. Real estate interest rates have become a hot topic.
During the Financial Crisis, which took place in 2008, and the plummet of the real estate market, the Federal Reserve had no other option but to drop interest rates to a severely low percentage. Now that they are increasing the rates, it will be affecting North Virginia’s real estate market and encouraging many to keep their eyes peeled. Real estate investors believe now is the hottest time to sell, as the increase in rates will create lots of buyers who are desperate to purchase before the rates get tackled by another increase.
Mike Putnam, North Virginia real estate agent, believes people are going to rush before the rates go even higher. He states: “Since the rate hike last week, we are already getting an increase in the number of calls from those interested in purchasing a home in Northern Virginia, so there is no question; this increase is starting to create urgency for those who have been on the side lines.”
Officials from the Fed have commented on their strong position, as they feel the economy is strong enough to keep growing with a little less help from the Central Bank. Moreover, real estate investors believe that they will gain a better return from their investment, which will, in turn, leave them in a better position. But they are not the only ones who have responded so quickly to the news; the banks’ ears have been burning. Wells Fargo, a world power in banking, became the first to advance their prime lending rates due to the recent increase.
Subsequently, the interest rates affect the accessibility and convenience of capital as well as the demand for investment. These capital flows impact the supply and demand aspect for properties, which inevitably affects the property prices. The interest rates will affect the returns on substitute investments and price change in order to keep up with the inherent risks within the real estate sector. During the destabilisation periods in the credit market, the required rates of return for Real Estate also change, which means that investors who anticipate such increase in future rates will allow an increase in risk and risk premium as well, as an increase on downward pressure on property prices.
In addition, the short-term increase in interest shows confidence in the economy without having influence directly on mortgage rates. However, in the long-term, those mortgage rates and borrowing rates will increase, so it is best for people to get in there before it happens.