A Glimpse Into The Future
Okay, while I believe that no one can truly see into the future I do believe that we may be able to take information in hand and accurately predict the future. As your trusted real estate expert, here is my glimpse into the future just for you!
- You may have heard that the Federal Reserve has just ended QE. What is QE you ask? QE stands for Quantitative Easing, it is a monetary policy in which the central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative Easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative Easing is considered when short-term interest rates are at or approaching zero and does not involve the printing of new banknotes. Since the Federal Reserve has ended QE the availability of money will start getting tighter. I do expect to start seeing mortgage interest rates start to rise slowly over the next couple of years. I believe we will see mortgage rates rise from around 3.85% today to around 6% in the next few years. This is a 50% rise in the interest rate. On a $250,000 loan, the principal payment would go from $1172 a month to $1499 a month. This rise in rates effectively reduces the amount of money a buyer can spend on a home.
- The real estate market recovery we have seen over the last couple of years has been driven mostly driven by a few large real estate investment hedge funds. These funds purchased tens of thousands of homes in the area from either the open market or from a foreclosure auction. The funds bought properties, fixed them up, and rented them out to achieve a specific yield. The funds have about a 5 to 7-year plan for these homes. After that time, they will most likely start to sell off some of these properties slowly. Because of the funds buying and renting these homes out, two things have happened. One, prices have risen and two, rents have fallen to a point where the funds cannot find a lot of properties that meet their required yield. Since the funds are unable to meet their required yield they have pulled back a lot of their buying. We have not seen the effects of this reduction in FishHawk Ranch but in other areas, this pullback has been noticeable.
- The availability of credit is still very tight. Even though interest rates are at historical lows it is still hard to get a loan. Credit standards are higher and paperwork is harder. Hopefully, as interest rates rise lenders will be able to loosen credit standards making it easier to get a loan.
So what does all this mean for you?
FishHawk Ranch Real Estate Seller
If you are a FishHawk Ranch real estate seller it may be a great time to sell your home. I do believe in the future there will be more competition on the market as it takes longer to sell homes. I do also feel there is a chance to see a slight decline in the value of homes as interest rates rise. I do not believe there will be a large reduction in prices but I would not be surprised to see some.
FishHawk Ranch Real Estate Buyer
If you are a buyer I don’t feel you need to rush into the market at this point just because you fear you will miss any appreciation. This may be a good time to buy if you want to take advantage of the historically low-interest rates. I think that the lower rates you will get today will more than offset any possible price savings you may see in the next few years.
We have not seen a balanced real estate market in a long time. I believe one is coming, personally, I think it will be a nice change!
Now you have my little view into the future. Let me know your thoughts!
If you found this Real Estate article beneficial, please share it with others who could benefit from it. And thank you for sharing!
Jeff is a top-selling, nationally recognized REALTOR® and local FishHawk Ranch real estate expert. You will find him selling homes in Tampa Bay, Florida, and surrounding areas. Some of those areas include FishHawk, Lithia, Riverview, Valrico, Apollo Beach, Brandon, and Tampa.
If you are looking to sell or buy a Tampa Bay area home, Jeff is your local and trusted professional. He can be reached via phone/text at (813) 421-3007 or by contacting him below.
Connect with Jeff on:
© 2015, Jeff Gould. All rights reserved.