Buying and Selling in Today's Economy
By: Mark H. Stowers
Buying and selling in today’s economy is still a hot item – even with the Federal Open Market Committee raising the benchmark interest rate by three-quarters of a percentage point to a targeted range of 1.5%-1.75%. Banks use the rate to set borrowing costs for short-term loans they provide to each other but it also feeds through to a multitude of consumer products like credit cards, home equity loans and auto financing.
Buying and Selling in Today's Economy
Inflation has been soaring over the past year, with the consumer price index in May posting an 8.6% increase over the past year. The Fed is predicting another raise in interest rates coming in July to further combat inflation. The time to buy a home is now as rising interest rates cut into the overall price of what buyers can afford. Sellers are still seeing more over market price offers but the amount of those is diminishing.
Kara Edwards, a Listing Agent with Jim Shaffer and Associates has nearly a decade of experience in the industry. She still sees a hot market despite the Fed’s move on interest rates.
“What I’ve been seeing from my buyers and sellers is the rate continues to climb and the experts that I watch and follow have said they anticipate the interest rate to continue to climb,” Edwards said. “What I constantly remind our buyers is that we’ve had ridiculously low interest rates. Three percent is such cheap money that we haven’t seen in a really long time. People see how it’s gone up from where it was a year to a year and a half ago and they panic. The Fed is raising rates to calm inflation.”
Edward’s own first home financing was at nine and a half to 10 percent interest, 30 years ago.
“We were so happy because that was seven percent better (17 percent) than it was in 1981,” she said. “It’s important to look at that perspective. It’s still a really good rate to borrow a large amount of money for such a long time.”
In handling listings, Edwards has seen less over asking offers from perhaps 20 down to five. And cash buyers are still waving money as well as buyers getting inspections waved and such.
“But inventory hasn’t been boosted in any way,” she said. “It’s even more restricted. A lot of people who were out looking for homes have found them.”
Even new construction isn’t adding to the total according to Edwards.
“We have a housing shortage across the country that’s about four million houses,” she said. “Even here in the Woodward Corridor where people are building new houses, they are tearing down old houses and not adding new inventory.”
And Baby Boomers are flashing cash and credit for homes.
“Some of those are people who went through COVID and realize they need more space. Others are people with great jobs and credit and are looking for a home. Those are the people looking to buy houses,” she said.
Edwards is also working creative closings with her clients.
“It’s still a good time to buy and sell. One thing we are doing is structuring for post-close occupancy to give them the time they need. I had a client who closed yesterday ad who sold their house in March and then had 90-day post-close occupancy. They were able to find and close on their new house and they’ve still been in their home and are handing over the keys and moving next week. There are ways to structure it to help people,” she said.
Even with a rising interest rate, it’s a great time to buy and sell your home.