If you are thinking of buying a Door County home you might wonder if you should wait. Wait for interest rates to go down, wait for more properties to come on the market, wait to see if prices on homes go down?
If the Time is Right Then the Time is NOW
If the time is right for you to buy a Door County home, condo, or piece of land, then the time is NOW. There is never a wrong time to buy the right Door County home, condo or piece of land. History shows us that focusing on the market, its ups and downs, is never the smart approach to buying a home. Whether the “right” means the right price or the right home, waiting on the market will seldom work to your advantage.
Are you contemplating a purchase in 2019? This post on why 2019 might be a good time to buy may be of interest.
Real Estate Cannot be Lost or Stolen, Nor Can it be Carried Away
Former president of the United States, Franklin D. Roosevelt said, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” Those words ring true still today.
Long term factors generally make real estate a solid investment. While you should always be aware of the fluctuations in the local Door County real estate market, real estate tends to be more stable and rewarding over time.
If Interest Rates Rise Do Home Prices Go Lower?
I’ve heard some think that if mortgage interest rates rise, that then home prices will fall. There is not a direct correlation between higher mortgage interest rates and home prices going lower, nor is there a correlation to lower mortgage rates and home prices rising.
Fixed interest mortgage rates, those loans sold to Freddie Mac or Fannie Mae, are not set by your lender or mortgage broker. Freddie Mac and Fannie Mae are big, huge, financial institutions that buy mortgages from lenders and bundle or package them into securities, and then sell those securities to investors.
So What Does Cause Mortgage Interest Rates to Go Up or Down
It is the supply and demand of mortgage money that has the most effect on mortgage interest rates. The Prime Rate has very little effect on mortgage interest rates because fixed rate mortgages are sold on the secondary market to those investors. The Wall Street Journal publishes a Prime Rate, and that is the rate that banks and lenders use to establish their rates for home equity lines of credit or general lines of credit. The long-term fixed mortgage rate is not tied to it.
The Federal Reserve does not set the prime interest rate as many believe. The Prime Rate is the interest rate set by individual banks, and in some cases is known as the Reference Rate. As mentioned above, home equity lines of credit and other general lines of credit have their rates determined based on the Prime or Reference Rate.
The Federal Open Market Committee establishes a rate that banks charge each other for short-term borrowing, and the bank’s Prime or Reference Rate is based off that rate established by the Federal Open Market Committee.
So you see this determination of how interest rates are established is a complicated factor and really is not solely tied to the federal government. It is based on supply and demand of mortgage funds.
Maybe more information than any of us want to know about prime or reference interest rates!
It’s Supply and Demand
Back to the beginning, if mortgage interest rates rise it does not mean that home values will fall. The greatest impact on home values is the supply and demand of homes. When fewer homes are available, prices may be up. If there are a lot of homes available in a particular price point or area, the price may be lower.
Should I Wait?
We’ve discussed that trying to time the market, time the flux of mortgage interest rates probably does not work to anyone’s advantage.
We’ve discussed that it is supply and demand in the housing market that has the greatest impact on the rise of fall of home prices.
So, if the time is right for you relative to your employment, your financial ability, and your mindset, then NOW is the right time.
Call Lisa Bieri your Door County Real Estate Specialist at 920-493-5472 to get started.