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What the Fed’s Interest Rate Hike Means for theHousing Market

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Marleny Hucks
Marlene (or Marleny as she is known in Spanish) is a mentor, teacher, cross-cultural trainer, storyteller, writer, and for those who have been under her leadership or simply sat across the table from her, she is a mirror of destiny. Her love of word and image were formed early on by one of her heroes, Dr. Seuss. If you asked those who know her well, they would describe her a compassionate, funny, wise, curious, honest, real, strong, sensitive and totally human which comes out as she teaches and writes. She sees all of life, even the most mundane, through faith and believes that who we become as we live this side of the veil is what matters not the journey itself or our circumstances. Marleny Hucks has spent her life crossing bridges. She comes from a diverse background of ministry roles and contexts as well as has transitioned in and out of the business world. Having lived outside the country as well as traveled extensively she has a fascination with culture causes her to live her life within a global mosaic no matter where her feet are planted. Marlene currently lives in South Carolina with her husband David, who owns a news company but who she says is a “crime fighter”, bringing light into darkness in their systems of their city. Marleny currently works as a content management specialist covering Myrtle Beach News for MyrtleBeachSC News.

The last few months have been a rough ride for prospective homebuyers, with property prices continuing to skyrocket. The situation for buyers became even more fraught last week, with the Federal Reserve increasing interest rates (for the third time this year), raising the cost of borrowing yet further. This isn’t good news for owners, either, who now face higher mortgage payments each month.

In terms of the housing market in general, this will have major consequences: while the Fed’s intention is for the interest hike to slow down inflation, it’s likely to make buying a property out of reach for many potential homeowners. It will also mean that there will be a significant increase in the number of owners unable to meet their monthly mortgage repayments.

Those looking to buy, therefore, may be able to make the most of a real estate short sale to purchase a property at a below-market price. For current owners who find themselves struggling with payments, a short sale is often a way to avoid foreclosure, and we look at these in more detail below.

The Effect on Mortgage Rates

This month, the average fixed-rate mortgage sits at around 5.23% – just last year, the rates were averaging 2.96%; the Fed’s recent rate increases have played a key role in this jump and – effectively – shrink the buying pool. Real estate is now likely to sit around on the market for a longer period before selling, as compared to pre-pandemic, exacerbated by the fact that a general rise in the cost of living has put a squeeze on potential buyers, making it more difficult than ever to be able to save a deposit.

Added to this, the number of houses actually on the market is currently at a historic low, which means that, even with demand falling as a result of mortgage rate increases, the upsurge of property prices is unlikely to slow down any time soon.

Construction Issues

The housing situation has been further complicated this year by a downturn in construction activity that has been the result of large-scale increases in material and transport costs. Experts have called for government action to bolster the supply side of the supply-and-demand equation by, for example, tweaking regulations and policies to help tackle issues of labor shortages and get materials moving again.

The problems that construction companies are facing are aggravating the problem of a general deficit of housing stock in the USA. This is further fueling the upward trends in prices – not least because the increase in building costs is not filtering through to the property’s final valuation point.

Short Sale Solutions

The Fed’s interest rate hike, however, may have an unexpected benefit for those desperate to get onto the property ladder. As touched on above, there is likely to be a significant number of properties entering the market on a short sale basis, giving prospective homeowners the chance to buy a house for a bargain price.

For owners who owe more on their mortgage than their property is worth but who can’t wait for prices to rise again, a short sale is often seen as a better option than a foreclosure, not least because it has much less of an impact on credit rating. For buyers, although short sales can be complicated to negotiate, and you’ll need to sift through listings with a fine-tooth comb to find them, they can mean the opportunity to buy a home at a price drastically below the going market rate. Finding a realtor who has plenty of experience in dealing with short sales is highly advisable if you think this could be a good option for you.

The Years Ahead

Things are set to get better as the year progresses for new buyers and homeowners alike, and, by 2023, the rate of inflation is expected to have fallen significantly; the knock-on effect will be a return of balance, in terms of supply and demand, in the housing market.

While another rate hike this year isn’t out of the question, there is light at the end of the tunnel, with economic activity on the rise again, following a dip in the first quarter of 2022. As buyer confidence and spending power gradually return, so, too, will stability in the real estate market.



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