Last month, over 271,000 jobs were added in the U.S. – the highest amount so far this year. The unemployment rate dipped to 5 percent, and wages rose at the fastest pace since 2009. In a report released last week by the Feds, all signs point to a healthy U.S. job market, almost fully healed from the deep wounds of the Great Recession. This is really great news! But, because there is always a “but”, the healthier economy is raising expectations that the Federal Reserve will begin withdrawing its support for the recovery by the end of the year.
In a nutshell, interest rates are very likely to rise over the next year.
Not in a sky-rocketing fashion, but most experts anticipate rates to move in the 5% range next year. The last time rates have been that “high” was back in 2009. Because, let’s be honest, 5% isn’t exactly loan shark territory. But, an increase in rates can make it harder for some buyers to make the cut when it comes time to qualify for a loan.
There are those the believe a rise in interest rates will result in a decrease in home prices. In fact, there are those that will convince themselves that rising interest rates is like the apocalypse – the beginning of The End. News flash! Nowhere in the last 50 years has there been a direct correlation between rising interests and rising home prices. I know this because Michael Orr tracks this sort of thing. The only thing that affects home prices is the old “supply and demand” phenomenon. When there are fewer houses than buyers, prices go up. When there are fewer buyers than houses, prices go down. That’s just the way it works. The rising interest rates will have the greatest impact on the lower price points – where there are most definitely more buyers than houses – so for most folks, you will have to spend more to buy a house.
Is it time to panic? Buy a Sears tent and plant a garden? No! Things are really GOOD right now! But if you are interested in buying a house, waiting for a better day is not the best strategy. You will just end up spending more than you will if you make your move now.
Need help with a game plan? You know where to find me!