Why Interest Rates are (Likely) Lower Now than They’ll Be for The Rest of The Year

         

The Fed just raised interest rates, no secret there. It went up by a quarter percent. And it's likely that we're gonna see interest rates go much higher than they are today.

And so there's concern in the marketplace, like what are these interest rates gonna mean for the real estate market? There's a lot of differences between where we're at today in the market and where we've been in the past. For instance, right now we have the lowest supply of homes ever recorded. So that's gonna indicate that demand is probably gonna stay pretty strong and healthy because we need more supply to fill the demand.

But there could be a situation where you get to what's called buyer resistance. And that's where buyers say, "I can't afford to pay anymore for a mortgage payment."

We're not there yet. We still have high demand. And just by comparison, yes, rates are higher than they were a year ago certainly. But if we go back decade by decade, let's go back to the decade when interest rates were higher and we had the same level of inflation.

Inflation is the reason why The Fed is rising the interest rate. So they're trying to get inflation under control.

When was the last time inflation was this high? 1982 was the last time inflation was this high. And guess what interest rates were at that point... Interest rates in 1982 in our country were 16%.

So when we're looking at sub 4% interest rates, yes, it's high, but relatively speaking, it's still extremely low.

We should also be pointing out to buyers and sellers that these rates at 4.5 or 4.6 are gonna seem very low. Very soon.

When we get to the end of 2022 and into 2023 and 2024, these rates are gonna seem like a bargain to us.

Go back in time over the last several decades. Over last several decades, here's where interest rates have been:

2010s — average interest rate during that decade 4.07%. It was a low decade.

2000s — not that long ago, interest rates were 6.29%.

1990s — the interest rate on average was 8.12%. That's when I was first starting out in the industry and we thought that was our great rates are so low, right? My first house I bought 10.5% interest rate. I thought I'd scored at 10.5%.

1980s — average interest rate for the decade was 12.7%.

1970s — when we had high inflation and similar gas issues back then, interest rates on average were 8.86%.

So think about the interest rates relatively, not relative to just the last year or last month. Go back over the last several decades.

What people should be thinking about is I need to take advantage of these rates before they go higher. Especially the millennial generation who may have already seen in the lowest interest rates in their history.

So let's jump in. Let's help them get involved with the market. Let's help them lock in a payment that's gonna be level for 30 years before they miss a window to get this rate. Because the rates today are probably gonna be the lowest rates we see for the year.

So just keep that in mind. Go out there and train (and educate) your clients.

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