The Federal Reserve finally raised interest rates. In a unanimous decision the Federal Reserve raised the federal funds rate by 25 basis points to 0.25%-0.50%. This is the first interest rate increase since 2006, that’s right, almost 10 years since a rate hike. Going forward the Fed is expected to systematically raise interest rates gradually based on economic indicators. With the economy improving the interest rates are set to rise in 2016. The hope and the expectation is they will rise very gradually as not to bring real estate purchases to a crawl.

What does this mean if you’re buying a home in San Diego and need borrow money to buy that home?

Well it means that money just got more expensive to borrow, but not by much. Also, since we know that rates will rise systematically going forward, then borrowing money to buy a home now rather than later will be less expensive. If you’re buying in 2016, start early and buy a home or condo or whatever you type of real estate you want to purchase sooner than later.

What does this mean if you’re selling a home in San Diego?

This means that a small percentage of buyers that could afford your home and wanted to buy your home can longer qualify for the loan to purchase your home. This also means that buyers looking in a higher price range will now be looking in your price range and may not like the fact that they are buying less of a home for the same amount of money. For instance if a buyer was qualified up to $500,000 to buy a home and then after the interest rates rise they now only qualify for $470,000 they will do one of 3 things.

1. Look at homes in a lower price range then what they were looking at
2. Offer less money for your home
3. Decide not to buy at this time

Since interest rates going up is predicted to continue going forward then the scenario of a home buyer qualifying to borrow less money than they previously were able to will continue. This will slow the rise of home prices, which in many ways is not a bad thing. For the home seller, the sooner you sell the better and for a buyer needing to borrow money the same logic applies.

Call The Lewis Team to discuss buying and selling in San Diego County.

If you’re looking to buy or sell real estate this could be a great opportunity for you.

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