COLORADO SPRINGS, Colo. (KKTV) – On Wednesday, the Federal Reserve raised interest rates for the fourth time since March. It now sits at 9.1 percent, another three-quarters of a percentage point from last month’s increase.
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11 News Lawrence Yun, Chief Economist of the National Association of Realtors, spoke on Wednesday about how this increase will affect real estate growth. “The housing market, after two years of exceptional performance, is taking a breather. Home sales are slowing from a record-breaking pace last year. “Very stable market conditions but reasonably priced homes are still selling quickly and home prices are still higher than a year ago,” says Yoon.
Homes in El Paso County have been on the market for about two weeks, according to the Colorado Association of Realtors. The mortgage rate is currently set at 5.5%. Yoon tells 11 News that mortgage rates may not move as much in response to the Federal Reserve’s decision.
“Mortgage rates are already priced in and how much will the Fed do today or in the coming months or early next year? Because there will be several rounds of rate hikes by the Fed, mortgage rates may not move that much and will respond to the Fed’s decision today,” Yun said.
Moving to the new interest rate, Yun says both home buyers and sellers could be affected. “First, home sellers need to understand that the market has changed. The days of profit margins adding another 10% to the value of a neighbor’s old home no longer works. So they need to be realistic about market conditions. There are fewer buyers in the marketplace and even homes for sale today may be higher than they were a year ago. “It might not be a very high situation,” Yun says. “Home sellers need to be very realistic about today’s changing market conditions.”
For those currently buying homes, Yun advises, “Stay within budget, don’t overextend. That poses some risk in the future for those who always stay over budget and still have the financial means, because many people will no longer be able to get a loan. If one is still able to get a loan, it means they are locking in monthly payments now and in the future, unlike the rising rent.
11 News also spoke to Joe Craig of the economics department at UCCS who said this surge in demand may not be the last we see in the next few months.
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