Historic Mortgage Rates by Decade

Many future homebuyers and homeowners are currently waiting on the sidelines to see where the market is going before making a move, but this may not be the time to stay stagnant. According to many of the major business and financial publications, we are on the path to increased interest rates and a steady amount of inventory.

In a recent PEMCO Realty article we explained that a ‘normal’ real estate market requires a 6-month supply of homes for sale in order for prices to increase only with inflation. The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018) that put upward pressure on home prices, but there was a shift from June 2018 to August 2018 with an average supply increase of 1.4% for those months.

Inflationary pressures, rising household debt and increase in pricing for contracts tied to the Fed’s policy rate are all pointing toward increases in interest rates over the next few quarters and as soon as December 2018.

According to Forbes, “U.S. interest rates have actually been rising for a while now, but at a glacier-slow pace that many people would have not noticed unless they were in the business of tracking them like we are.  Our research strongly indicates long-term U.S. interest rates are at a secular decision point, one that is likely to eventually be resolved by significantly — if not surprisingly — higher borrowing costs over the next one to several quarters.”

Major hikes and predictions of future hikes in interest rates may deter buyers from committing to a purchasing a home, which means sellers may be leaving money on the table if they don’t sell before we see the increases.

The below chart features Freddie Mac’s U.S. Economic & Housing Marketing Outlook showing their projected interest rate increases over the course of 2019.

Denver PEMCO Realty Broker, Dan Rubio, states “The current and future state of our economy, interest rates and real estate market predict stabilization.  With that said, those thinking about buying a home and homeowners wanting to sell need get moving fast. Now is the time to for buyers to strike before interest rates further increase resulting in a higher payment for less home, while homeowners who taking action are at less risk of leaving money on the table.”