Now may be the best time to take advantage of historically low rates as the Feds hint an upcoming rate hike this December.
Lets talk about Interest Rates:
The short term rate hasn’t been adjusted by the feds in about 9 years thus far. The fed funds rate determines how cheaply money can be borrowed in the US economy. Since Dec 16th 2008 the fed funds rate has bounced between 0.00% to 0.25% which are all time lows. They have been talking about it for years now but havn’t been able to do it as we are slowly recovering from this lost decade. Median housing prices are within 6% of all time highs at this point but supply is decreasing as well as demand as we enter deeper into Winter of 2015-2016.
For interesting reasons people are looking forward to the rate hike. A rate hike would indicate our government having confidence in our economy as it will continue to prosper with the hike. Why would the government raise rates if it would cause of economy to collapse? When a charman of the federal reserve by the name of Janet Yellen gave a speech in Massachusetts she indicated that as long as the state of the economy would remain relatively stable and the same she would expect a rate increase end of this year. The stock market in the United States responded well after that.
Before the feds would change rates up and down all the time. Infact expecting a change monthly was a common commodity in the past. Lately we’ve been at a rock bottom below 1% fed rate for several years now with little or no change because we couldn’t go any lower.
We are all expecting a quarter percent increase to the short term rate come this December 2015. This would move us off a zero perfect rate that we’ve had for a few years now and get this American powerhouse moving onto glory as we expect a strong leader of a president to take ahold of this country. The increase to the short-term rate overtime will affect rates for nearly all financial vehicles such as savings and checking accounts, mortgages, and loans. It is basically the price in which the bank pays to borrower these funds from the Federal Reserve.
As interest rates continue to rise over the upcoming near future it will affect property home buyers ability to purchase if they require mortgage financing money. Please look at the graph to see the difference in payment based on a monthly scale. If you multiply by twelve you can see the yearly difference of how much money goes out. It all adds up for that average middle class family.
Don’t forget that overall rates are still below historical levels and taking advantage of lower rates today can mean a free trip to the Caribbean islands each year.
Take advantage of historically low rates that most likely we will never see again in our lifetime.
How is the Orange County Housing Supply?: the overall supply of homes available in Orange County has dropped 10% in the past month alone!
Just this past month we lost about 625 homes or about 10% of the number of homes available for sale on the MLS in Orange County, Ca. The total amount of homes sits around 5800 currently. We have officially entered the slowest period of the Orange “County Real Estate home sales market. The supply, demand drop to the lowest levels of the year and will continue through Winter 2015 in OC. The season continues through Super Bowl Sunday, when Orange County begins its transition into the Spring Market.
This time last year there were more homes on the market by about 600. But today it is more of a slight sellers market compared to winter of last year. Basically the sellers are more able to demand more during negotiation this year compared to last.
Homes Pending Escrow in Orange County: The amount of homes in escrow has increased about 5% in the past 30 days.
Some buyers may be trying to take advantage of closing before the end of the year. Also some clients who are relocating can make the process easier when kids are on their winter break school vacation. I expect things to change in March or at least in the Spring time of 2016.
This year there are 10% more homes in escrow when compared to this time last year. Demand remains high while supply decreases.
Here is a breakdown of what we discussed about the Orange County Housing Market for Winter 2015-Spring 2016