We’ve had a lot of growth in our economy in general over the last couple of years, and today we’ll be touching on one specific aspect of it: Interest rates. Before we get into our discussion, though, I’d like to clarify an important term: Basis points.
Basis points are used to describe changes to interest rates. A single basis point is a hundredth of a percentile, so, therefore, 25 basis points would be equivalent to 0.25%.
So when you hear someone say that the Federal Reserve met and raised interest rates by 25 basis points, this means there was an increase of 0.25%.
With that in mind, let’s move on to our main topic. Interest rates can have a significant impact on buyers and sellers alike in our market. And given that the Fed meets four times per year to discuss these rates, it’s important to understand how this may impact your goals.
Rates have been steadily rising in recent times, but even after the most recent increase in September, they are still low compared to historical averages.
You can see this point illustrated in an extremely powerful graphic we’ve featured in today’s video (at 1:24). This graphic shows precisely how interest rate hikes correlate with drops in affordability.
So, what does the current trend of rising rates ultimately mean for buyers and sellers?
For sellers, the good news is that recent appreciation has left homeowners with higher levels of equity. For buyers, these changes mean that it may be better to purchase a home as soon as possible.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.