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        <title>Huntsville, Al Real Estate Blog</title>
        <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/tags/interest-rates/</link>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rates-in-2026-should-you-buy-a-home-now-or-wait.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rates-in-2026-should-you-buy-a-home-now-or-wait.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Interest Rates in 2026: Should You Buy a Home  Now or Wait?</title>
    <description> <![CDATA[ 
Interest Rates in 2026: Should You Buy a Home Now or Wait?





If you are waiting on 5 percent mortgage rates to buy a home in Huntsville, you may be waiting a long time and miss the right home in the process. A lot of buyers tell us, “We’re just going to wait until rates get back into the 5s.” The problem is that waiting on a specific number can cost you opportunities that you cannot get back.


This post breaks down where many forecasts expect mortgage rates to land in 2026, what “normal” looks like, and why Huntsville’s affordability story matters when you are deciding whether to buy now or wait.


Where Mortgage Rates May Be Headed in 2026


Forecasts vary, but several major outlooks point to 30-year fixed mortgage rates staying in the low 6 percent range through 2026. For example, Redfin’s 2026 predictions call for an average around the low 6s, and a Reuters poll of housing experts projected an average rate a little above 6 percent in 2026.


Fannie Mae’s Economic and Strategic Research group has also projected rates ending 2026 around the high 5s to low 6s, depending on the specific forecast release.


Could rates briefly dip into the high 5s at some point? It is possible, but if that happens, the window may be short. The more practical approach is to plan for rates around the low 6s, and be ready to act if a better opportunity appears.


What Homebuyers Often Understand About &quot;Normal&quot; Rates


Many buyers compare everything to the 2 to 4 percent era and assume that is the standard. In reality, that period was unusual and tied to emergency monetary policy. Even today, national reporting and rate tracking show the market hovering around the low 6s, which is consistent with many 2026 outlooks.


The takeaway is simple: building your entire buying plan around a return to 5 percent can keep you on the sidelines longer than you expect.


The Biggest Buyer Mistake: Waiting for the Perfect Rate


One of the biggest mistakes buyers make is waiting for the perfect interest rate. Because while you may be able to refinance a rate later, you cannot refinance a missed opportunity. Here is why that matters. If rates drop noticeably, demand tends to surge quickly. More buyers jump back in, competition increases, and homes that felt negotiable can turn into multiple offer situations. The payment might improve slightly, but the price and terms can move the other direction. If the right home fits your life, your budget, and your long-term plan, it often makes more sense to focus on the total deal, not just the headline rate.


Rates vs. Affordability: What Actually Matters in 2026


In 2026, rates matter, but affordability matters more.


Across the country, housing affordability has been a challenge in many markets. That is one reason economists are watching not only mortgage rates, but also wage growth and home price growth. Some forecasts expect home prices to rise modestly in 2026, which can help keep affordability from getting worse, but it does not automatically make buying easier for everyone.


A smart buyer strategy is to evaluate affordability in your situation using three factors: Your monthly payment comfort zone The availability of homes that match your needs The long-term plan, including how long you expect to stay in the home This is also where Huntsville stands out.


Why Huntsville is Different


Huntsville continues to be discussed as a market with stronger affordability than many peer cities, and there are local growth drivers that support demand.


A Housing Affordability Index score of 100 means a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home, using the index methodology. Local sources have recently pointed to Huntsville being around that 100 benchmark, which is a notable contrast to many markets that have fallen well below it.


Huntsville also has ongoing economic momentum tied to major employers and federal activity. For example, the City of Huntsville has stated that U.S. Space Command jobs are expected to transition to Redstone Arsenal over the next several years, and recent local reporting has covered the continued progress of the move.


When a market has job growth, population growth, and the ability to add housing supply, it can stay more stable compared to cities that are boxed in by limited land and limited building.


So Should You Buy Now or Wait?


If you are trying to decide whether to buy a home in Huntsville in 2026, here is a clear way to think about it.


Buying now can make sense when:




The monthly payment fits your budget comfortably.


You found a home that fits your needs long-term.


You want to avoid a potential wave of competition if rates fall.




Waiting can make sense when:




You need time to improve credit, pay down debt, or build reserves.


You are not sure about job stability or how long you will stay in the area.


The payment does not work at today’s rates and prices.




The key is not guessing. The best move is running the numbers with a lender and building a plan based on your timeline, your budget, and the inventory you are actually shopping in.


Quick takeaway for Huntsville buyers


Rates in the low 6 percent range are widely forecasted as a likely baseline for 2026. Huntsville’s affordability has been stronger than many markets, and waiting for 5 percent rates could cost you the right home, especially if competition rises when rates dip.


If you want help deciding whether now is the right time for you, reach out to a local expert who understands the Huntsville market. Call 256.333.MOVE to schedule a consultation, and we will help you map out a strategy that fits your budget and protects your options.
 ]]> </description>
    <pubDate>Fri, 16 Jan 2026 14:10:00 -0600</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rates-hit-a-3-year-low-what-it-means-for-homebuyers-and-the-housing-market-in-2025.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rates-hit-a-3-year-low-what-it-means-for-homebuyers-and-the-housing-market-in-2025.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Interest Rates Hit a 3-Year Low: What It Means for Homebuyers and the Housing Market in 2025</title>
    <description> <![CDATA[ 
Interest Rates Hit a 3-Year Low: What It Means for Homebuyers and the Housing Market in 2025





Big news, interest rates just dropped to their lowest point in three years. If you’ve been waiting for affordability to improve, this could be your window of opportunity.Today, I’m breaking down what this means for you as a homebuyer or seller, what’s driving the shift, and how to read the market signals that most people overlook.


Why the Drop in Rates


Let’s start with what just happened. Mortgage rates have fallen to the lowest level we’ve seen in three years. Now, most people assume rates move directly with the Fed, but that’s not actually the case. The Federal Reserve sets short-term rates, not mortgage rates.


Mortgage rates are much more closely tied to the 10-year Treasury yield, which has been hovering around 4 and trending downward. When that 10-year yield drops, mortgage rates almost always follow. That’s exactly what we’re seeing now.


Why This Matters: Affordability


So why does this matter? Because affordability, one of the biggest barriers for homebuyers, depends on three things: home prices, mortgage rates, and wages. Prices have remained relatively flat over the last year. Wages have actually grown faster than mortgage costs. And now, mortgage rates are finally coming down. Put that together, and affordability is improving for the first time in years.


To put this into perspective, just a 1 drop in mortgage rates can increase a buyer’s purchasing power by about 10. That means the same monthly payment now gets you a noticeably nicer home or helps more buyers qualify for the one they really want.


What’s Driving the Drop in Rates


So what’s behind this shift? The Federal Reserve is expected to cut rates two more times this year, each by about a quarter of a percent. While those cuts don’t directly lower mortgage rates, they signal to the market that inflation is cooling and that the Fed is confident the economy is stabilizing.


That sentiment helps push bond yields lower, and as we mentioned earlier, when those yields drop, mortgage rates follow. We’re already seeing that play out in real time.


What This Means for Home Buyers &amp; Sellers


So what does all of this mean for you?


If you’re a buyer, lower rates mean lower monthly payments and potentially the best affordability window we’ve seen in several years.


If you’re a seller, this means more buyers can now afford to get back in the market. Increased demand tends to stabilize home prices and, in some areas, can even push them up again. In other words, affordability today could become an opportunity tomorrow.


What to Watch Next


One last thing to watch is the spread between the 10-year Treasury yield and the 30-year mortgage rate. Right now, that spread sits at around 2.16 to 2.3, down from over 3 recently, but still a bit higher than the normal range of 1 to 2.


If that gap continues to narrow and the 10-year yield stays near or below 4, we could see mortgage rates fall even further into 2026. But if inflation ticks back up, that trend could stall. So keep an eye on that 10-year yield—it’s one of the best forward indicators in real estate.If you’ve been sitting on the sidelines waiting for the right time to buy, this might be it.With rates at a three-year low and affordability improving, it’s worth taking a fresh look at your numbers.


Our team can help you compare your options and run the numbers to see if now is the right time for your family. Because remember, Who You Hire MATTers.
 ]]> </description>
    <pubDate>Fri, 17 Oct 2025 15:05:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/factors-influencing-interest-rates-in-2024-what-buyers-need-to-know.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/factors-influencing-interest-rates-in-2024-what-buyers-need-to-know.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Factors Influencing Interest Rates in 2024: What Buyers Need to Know</title>
    <description> <![CDATA[ 
Factors Influencing Interest Rates in 2024: What Buyers Need to Know





The Wall Street Journal recently addressed a topic at the forefront of many minds: the timing of interest rate adjustments and their repercussions on relocation decisions in 2024. Initial projections leaned towards rate reductions for the year, with even the Fed penciling in three drops. However, mounting uncertainties stemming from elevated inflation levels cast doubt on these expectations. While the Fed's direct impact on rates is limited, there exists a complex link, with Fed rate adjustments having a ripple effect on Treasury rates, potentially influencing 15-year and 30-year rates. With inflation surpassing projections, questions emerge about the likelihood of rate drops. Let’s look at the intricacies surrounding inflation-driven challenges, potential impacts on the housing market, and insights into interest rate forecasts amidst an election year and broader economic dynamics.


Factors Driving High CPI: Shelter and Energy


The CPI data for March stood at 3.5, exceeding the Fed's target of 2. The main drivers of this high CPI were shelter and energy.


Shelter accounts for approximately 40 of this category. The high cost of shelter, coupled with housing affordability issues and higher interest rates, is impacting these CPI figures. It's improbable that shelter costs will decrease because despite a decrease in sales by about 11.3 in March, we still observed year-over-year price increases.


Likewise, energy costs are unlikely to decrease due to the current global uncertainty, including ongoing and potential conflicts. Both shelter and energy expenses are expected to remain high. In such a scenario, the Fed typically leans towards maintaining higher interest rates for an extended period.


Inflation Challenges &amp; Impacts on the Housing Market


Inflation is currently above the Fed's desired level. Their target goal is 2, but personally, I don't believe we'll reach that number. It seems unrealistic due to the high levels of debt in our country and the anticipated deficit spending. Both presidents have engaged in deficit spending, and regardless of who gets elected, this trend is likely to continue. Deficit spending tends to drive inflation, so I doubt we'll hit that 2 mark. The Fed is facing a challenging situation. Lowering interest rates could potentially fuel more inflation by increasing home prices. However, if they refrain from lowering interest rates, it could also contribute to inflation in the housing market.


The reason for this is that many builders have halted their projects due to higher construction costs and subsequently higher borrowing costs. When builders undertake new developments, whether multifamily or single-family, they need to secure construction loans. Currently, many construction loan projects are subject to interest rates between 8 to 10. For instance, if you aim to construct a $500,000 home with a 10 construction loan, that adds $50,000 in interest to the overall cost of the new home. Interest rates of 10 or 8 create a significantly inflationary environment for new construction compared to rates of 4 to 5. These costs are factored into the prices of homes.


Additionally, the reduced number of homes being built contributes to a lack of supply in the market. More supply generally enhances overall affordability and helps stabilize prices. With the current shortage of supply, inflationary pressures persist, pushing inflation numbers above the Fed's 2 target.


Interest Rates Outlook in an Election Year


In a normal year, I don't think we see interest rates come down due to inflation being higher than the Fed's target of 2. However, I do think we should have interest rates come down, probably not down to the 2 or 3 range, but we need to find that sweet spot somewhere in the 4 or 5 range to get more supply introduced into the marketplace. I don't know that the Fed realizes that yet.


In a normal market, I don't think we see interest rates come down, but I still think we have a shot for interest rates to come down in 2024, because this is an election year. You look at something that President Biden recently said. He said, “I'll bet you see those rates come down more, because I bet that little outfit that sees interest rates is going to bring them down,” at a recent campaign rally. I think interest rates could come down due to the election. It's just not as much of a slam dunk as we thought just a couple of weeks ago now that inflation numbers are higher than anticipated.


Forecasting Interest Rate Shifts


Overall, in the next few years, I believe we'll likely see rates remaining in the 6 to 7 range unless the Fed realizes the necessity of lowering rates to increase supply. Without such action, rates could stay in this range for an extended period because these rates are typical historically, not just in the last two decades. Based on the Fed's policy of aiming to reduce inflation to the 2 level, and considering that inflation is staying above that, rates could stay in the 6 to 7 range over the next several years.


After two decades of having lower interest rates, we might be entering a new normal period with the higher debt levels that this country has, deficit spending, and all the money printing that the Fed and the government are doing, and really the additional risk level as well.


Typically, we have ten-year Treasury yields with spreads between the ten-year Treasury and the 30-year mortgage rates of about 1.7. If a ten-year Treasury is at 4, you would typically see a 30-year rate of about 5.7. But right now we're seeing a spread of 3 due to all the risks associated with potential interest rate decreases, war, debt, and everything that's going on in the world. It's really unlikely that this spread comes down very dramatically in the near term.


Another consideration is potential quantitative tightening from the government. They've got a lot of loans on their balance sheet, $2.4 trillion worth of mortgages on their balance sheet, that they said they wanted to offload. They've really kind of stalled that now with interest rates starting to increase. But if they were to start that program back up, that would have a huge impact on interest rates and push them up very quickly as well.


Matt’s Advice


If you're a buyer, you may be wondering what to do. Well, I think you follow the smart money. Investors are buying. Blackstone has been all over the media; not only have they been buying, but they've also been encouraging other investors to look to invest as well because they think the market has bottomed out and single-family home sales to investors have hit a record high. My advice is life continues regardless of the interest rates; job promotions, marriages, babies, and empty nesting. Renting means you pay 100 interest, so if you're a renter, you want to get out of that scenario as well as start to build wealth.


Inflation stayed high due to the housing market and energy. With high inflation, it looks like higher interest rates could become the new normal. Even with that dip of 10.1 in sales volume, housing values have continued to rise. As a result of all that, energy is unlikely to come down with ongoing wars and potential escalation in the Middle East, so waiting for lower interest rates is likely going to cost potential buyers, with both higher prices on homes due to inflation and the lack of supply.
 ]]> </description>
    <pubDate>Fri, 03 May 2024 14:53:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/2024-federal-reserve-rate-cut-predictions--impact-analysis.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/2024-federal-reserve-rate-cut-predictions--impact-analysis.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>2024 Federal Reserve Rate Cut Predictions &amp; Impact Analysis</title>
    <description> <![CDATA[ 
2024 Federal Reserve Rate Cut Predictions &amp; Impact Analysis





In this analysis, we explore the dynamic relationship between inflation, interest rates, and the Federal Reserve's potential actions in 2024. With inflation rates showing signs of improvement, market reactions are influenced by the Fed's indication of potential rate cuts, leading to anticipation and uncertainty. By examining factors such as job growth, market expectations, and economic projections, we aim to assess the likelihood and timing of these rate adjustments. Understanding these intricate dynamics is pivotal for individuals navigating the ever-changing landscape of the Huntsville, Alabama housing market amidst economic fluctuations and policy shifts.


Inflation &amp; the Market’s Reaction


The Consumer Price Index (CPI) data for January showed a 3.1 reading, signaling a significant improvement—a drop of more than three points compared to last year. We began last year at 6.4 and closed December at 3.4, indicating a positive downward trend. This improvement is noteworthy considering the peak inflation rate of over 9. Life is often shaped by expectations and predictions, and unfortunately, Wall Street's forecast was 2.9. We exceeded these expectations in terms of inflation. As a result, the stock market saw a 525-point drop on the day of the data release. Furthermore, this higher inflation data has led to an increase in the ten-year Treasury yield, pushing thirty-year rates up slightly as well.


Interest Rate Volatility


Interest rate volatility stems from the disparity between the actions and signals of the Fed and the expectations of the market. The Fed has indicated three rate cuts for 2024, a departure from the market's previous expectations. We're now seeing a closer alignment between the Fed's signals and market expectations.


Previously, the derivative market had priced in 4 to 5 rate cuts, but this has likely decreased to around three or four, especially with the CPI data at 3.1. This suggests excessive optimism, considering last year's speculation by futures traders of seven rate cuts in 2024, a scenario unlikely to occur.


The significant difference between the predicted seven cuts and the likely three contributes to market volatility. Now that those two are converging, I expect to see less volatility in the overall market and I expect to see the Fed actually cutting rates here in 2024.


Fed's Balancing Act: Inflation and Jobs


The Fed's ultimate decision will hinge on whether inflation continues to decrease and the job numbers improve. It's unlikely to decline at their next meeting in March, given that 353,000 jobs were added in January, surpassing expectations. As previously discussed, inflation is higher than anticipated, with the current rate at 3.1 compared to the expected 2.9.


The Fed aims to achieve the elusive 2 inflation target. However, this goal presents a significant challenge, considering the various government programs and increased money printing. It will be quite a task for the Fed to bring the rate down from the current 3.1 to 2.


They are also cautious about undershooting inflation. Lowering rates could potentially inflate housing costs, pushing inflation above 3, even reaching 4, 5, or more. They aim to avoid this scenario, but they also risk overshooting if they wait too long. This dilemma presents a challenging situation for the Fed—they strive to avoid both undershooting and overshooting inflation.


When Will The Fed Cut Rates?


When might these Fed rate cuts potentially happen? Well, the next scheduled meeting is on March 20th. Most experts aren't predicting rate cuts for that day, mainly due to the strong job numbers. Now, with the CPI data showing 3.1 compared to the expected 2.9, it's highly unlikely to see any rate cuts in March, as many had anticipated. Experts had pointed to the May 1st meeting as the potential for the first rate cut by the Fed.


However, it's possible that this could be pushed back to June 12th. August 31st is also a possibility. Yet, I believe that might be too late, especially given that we're in an election cycle. There's significant pressure from politicians in Washington to stabilize rates for reelection purposes. August 31st may even mark the second rate cut.


Other meetings are scheduled for September 18th, November 7th, and December 18th. The Fed has signaled three rate cuts during 2024, a prediction I find quite reasonable. Despite the slightly higher CPI data, the fact that it's an election year suggests that we may still see rate cuts. If it weren't an election year, I would say it's possible we wouldn't have any rate cuts this year.


Homebuyer &amp; Home Seller Advice


Realtor.com recently featured an article suggesting that the worst may be over for the housing market. They even interviewed us for that piece. Huntsville stood out as a highlight for the rest of the nation, prompting them to seek information from us.


If you're considering selling your home now, one recommendation I have is to have your home on the market before the first rate cut. When rates begin to decrease, more potential buyers are likely to enter the market. Having your home listed during this time could lead to increased interest and possibly even higher offers.


As for buyers, I suggest considering going under contract before the first rate cut, even if it means accepting a slightly higher interest rate. This could provide you with more negotiation leverage and potentially result in a better price and terms. Remember, you can always explore refinancing options after the rate cuts. This strategy allows you to take advantage of both current market conditions and future rate changes.


 



 ]]> </description>
    <pubDate>Fri, 16 Feb 2024 15:17:00 -0600</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/navigating-surging-mortgage-and-treasury-rates-what-homebuyers-need-to-know.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/navigating-surging-mortgage-and-treasury-rates-what-homebuyers-need-to-know.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Navigating Surging Mortgage and Treasury Rates: What Homebuyers Need to Know</title>
    <description> <![CDATA[ 
Navigating Surging Mortgage and Treasury Rates: What Homebuyers Need to Know








With the elevated interest rates and higher mortgage payments, we find ourselves at a fork in the road. As consumers, we must carefully consider the path we want to take. Are we content staying in our current home with interest rates in the high 2’s and low 3’s, ensuring our payments remain manageable? Or do we want to pursue our dreams, which could mean relocating for a new job, retiring in a different area, or investing in that dream kitchen or an extra bedroom?In today's volatile financial landscape, we're witnessing a remarkable surge in both 30-year mortgage rates and 10-year treasuries. The connection between these two rates is pivotal in understanding the challenges facing homeowners and prospective buyers. With rates hitting a 20-year high, it's essential to take a historical view to grasp the gravity of the situation. But this isn't merely a numbers game; it's about how these soaring interest rates impact our housing options and the overall market stability. While a surge in rates may appear alarming, it's the underlying factors and their potential repercussions that deserve our attention. In this article, we'll delve into the intricacies of these surging mortgage and treasury rates and the ripple effect they create throughout the economy.


Surging Mortgage and Treasury Rates


We're currently seeing a notable increase in both 30-year mortgage rates and 10-year treasuries. This is because 30-year mortgage rates are closely connected to the movement of 10-year treasury rates. Analyzing the trends over the past 20 years reveals a significant rise in these rates, reaching a 20-year high. If we expand our view to encompass the last 50 years, including the 1980s, we notice that today's rates are much lower than what was seen in the 1980s, approaching what could be considered an average interest rate over this extended period.


The challenge we're confronting is that we've become accustomed to lower interest rates. Many homeowners locked in rates in the high 2's and low 3's, which has made them reluctant or financially unable to upgrade to more expensive homes. The increased borrowing costs associated with higher interest rates often mean doubling their monthly payments. This &quot;mortgage rate lock&quot; effect has resulted in reduced housing inventory, limiting our housing options. Consequently, even in a high-interest rate environment, home prices have remained relatively steady due to the limited availability of homes on the market.


10-Year Treasury Yield: Impact on Interest Rates and Markets





One crucial aspect to watch closely is the behavior of the 10-year Treasury yield. The Federal Reserve's actions have caused interest rates to rise, leading to higher payments on credit cards, car loans, and home mortgages. The challenge we face now is that the Fed has temporarily paused its interest rate hikes. Nevertheless, interest rates continue to increase, and the Fed cannot control this trend at the moment.





Traditionally, we've used the 10-year Treasury yield as a baseline, historically adding about 1.7 to determine the 30-year mortgage rate. Currently, the 10-year Treasury yield is approximately 3 higher than that historical baseline. This deviation primarily stems from significant fear and uncertainty in the market. People were uncertain about the Federal Reserve's intentions, which led to added risk in the market. Banks, when lending money for 30, 45, or 60 days, lock in a rate but also require a buffer to protect against potential losses in the future.





There has been a substantial amount of fear and uncertainty factored into the current situation. Many now believe the Federal Reserve is pausing its rate hikes, and there's even the potential for rate reductions in the future. Despite this, we've observed a significant increase in 30-year interest rates over the past couple of weeks. This increase is primarily attributed to fluctuations in the 10-year Treasury yield. The Treasury has introduced a substantial number of new bonds into the market, effectively oversaturating it with these fresh bonds. However, the demand for these investments hasn't matched past levels. As a result, interest rates have had to rise to a point where investors feel comfortable purchasing these bonds.





To provide some historical context, the United States has traditionally been viewed as the safest investment globally, particularly concerning our national debt. This status is somewhat like the gold standard, as all other investments are assessed in relation to it. Essentially, the interest rates on various investments are determined by the level of risk compared to the 10-year Treasury bond. Nevertheless, challenges arise when considering the trend of rising US debt. Many people are now questioning whether the United States remains the world's safest investment.





For instance, consider Fitch, which recently downgraded the US credit rating from AAA to AA+. The real issue here is that our current rating may not be as strong as it appears. Consequently, we might experience increased price pressure and higher premium demands from investors in the 10-year Treasury market, potentially impacting the 30-year mortgage rate market. This is a critical factor to monitor since the Federal Reserve lacks direct control over it, and it has the potential to keep interest rates elevated for an extended period, possibly even driving rates higher than what we are experiencing today.


 


Diversifying Investments in a Changing Market


Given Fitch's recent downgrade of the US economy and the Treasury market, it's prudent to consider alternative investments. Treasuries and government debt might not currently be the safest investment. Typically, during times like these, people turn to hard assets like gold, silver, and real estate. This can include your personal home or investment properties, which are more likely to retain long-term value compared to increasing debt loads that may lose value over time.


Housing Market Softening Amid Rising Rates


As mentioned in a previous video, we are currently facing a supply and demand imbalance, not only in Huntsville but also in markets nationwide. In a previous video, I predicted that even with interest rates in the 6 or 7 range, our market would still experience price stability, despite these rates being higher than what we've seen in recent years. However, I did mention that if rates reached 8, that's when the market could start to soften.


Now, we find ourselves with rates exceeding 8, and we're already witnessing a softening in the market, particularly in terms of resales and new construction. Homebuilders are reaching out to us with various promotions and specials, attempting to sell off inventory by year-end. If you're interested in new homes and want to learn more about these deals, you can give us a call and we’ll let you know where those best deals are located right now. 


An intriguing development to monitor is how these builders handle their homes, especially given the current trend of liquidating them at incredibly low prices. The question is, what will they do in the first and second quarters of 2024? Will they remain wary of rising interest rates, possibly slowing down production and inventory? Might they shift from speculative building to offering custom build options, or will they maintain or increase their production volume?


My speculation is that, with their current home liquidation practices, builders may exhibit caution in 2024. This caution is likely to impact the housing supply in the area, significantly affecting long-term housing affordability, as there won't be an adequate selection of homes.


It's important to note that there has been a 6 million home deficit since the Great Recession across the U.S., and it was predicted that it would take at least a decade of consistent building to bridge this gap. However, it seems that this progress might be delayed, as builders are likely to slow down their production in 2024.


Inflation’s Impact on Interest Rates


Another important factor to consider in the near future is a recent article from Forbes, which suggests that the government may need to resort to increasing its currency supply once more. When this occurs, it's likely to have an impact on inflation. If we experience a return to 5, 6, or even 8 inflation, investors will demand a return on their investments. They won't be satisfied with a 10-year Treasury yield of, say, 4 when inflation is running at 6, as they would be losing value in the market. Similarly, they won't be interested in a 30-year mortgage at 5 when there's 8 inflation, as it means the value of their dollars is decreasing by 3 annually.


This is something we need to closely monitor because if heightened inflation returns, it could solidify the current higher interest rates and keep them stagnant in the market for several years. This situation may persist until the issue with the value of the dollar resolves itself.


Economic Challenges and Interest Rate Uncertainty


With higher prices and increased interest rates, homeownership has reached a 50-year low. This has led many millennials to step back from the home-buying process, opting to rent or even move back in with their parents. In 2022, one in eight millennials returned home.


However, one group that's faring well amid this situation is the baby boomer generation, aged 65 years and older. Many of them have paid for their homes in cash or secured low-interest rates in the high 2's or low 3's. They're a vital part of the market, accounting for about 14 of consumer spending in 2005, though that figure has increased to 22 in 2022. This generation plays a significant role in keeping the economy stable.


An encouraging aspect of this situation is that if you have money intended for your kids or future generations, now could be an excellent time to gift it to them and earmark it for home purchases. Without this support, many millennials may remain locked into renting for the long term, which some are calling 'Renter Nation.' As many know, homeowners typically have 40 times the net worth of renters, with over $245,000 compared to about $5,000 for renters. Investing in this upcoming millennial generation can help them build family wealth and, in turn, benefit the overall economy.


Challenges in Predicting Economic Landscape


The current economic landscape is exceptionally challenging to predict due to various factors, particularly the rising Treasury yields. Organizations like the Mortgage Bankers Association and the National Association of Realtors are applying pressure on the Federal Reserve to refrain from further rate hikes, aiming to bring the market back down and stabilize rates. However, the key concern is whether investors will maintain their appetite for ten-year treasuries and 30-year mortgage bonds, considering the growing national debt.


Some believe that in an election year, there will be efforts to lower interest rates. Nevertheless, we need to closely monitor investor demand. If it falls short, regardless of the Federal Reserve's actions, it can continue to exert pressure on mortgage rates and all forms of debt in the country.


Realistically, I don't think we'll see rates again below 6, honestly, probably in my lifetime. However, there is a significant risk that interest rates may not only remain in the 8 range but potentially even surpass 8.


Matt’s Advice


At this point, we find ourselves at a fork in the road. You need to decide whether you're in your forever home and content with the current interest rates, which may range from high 2’s to low 3’s if you already own a home. On the other hand, if you don't yet own a home, you face the decision of pursuing your dream home, potentially one with an extra bedroom or in a new area. Ultimately, this is a choice only you can make.


The advantage of making a move now is that you can leverage the deals and offers currently available from both builders and in the resale market. Builders are particularly motivated, and they may be open to lowering their prices. In this market with rates at 8 or higher, you might have to accept this reality for a while. However, if rates drop to around 6, that could be a suitable time to consider refinancing in the future.


 



 ]]> </description>
    <pubDate>Fri, 13 Oct 2023 16:53:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rate-shifts--unique-homebuyer-opportunities--huntsville-al-housing-news.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rate-shifts--unique-homebuyer-opportunities--huntsville-al-housing-news.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Interest Rate Shifts &amp; Unique Homebuyer Opportunities | Huntsville, AL Housing News</title>
    <description> <![CDATA[ 
Interest Rate Shifts &amp; Unique Homebuyer Opportunities








In an ever-evolving real estate landscape, buyers and sellers are navigating shifting interest rates that have transformed the market over the past year. Matt examines how these interest rate shifts may impact your housing decisions, whether you're a buyer seeking opportunities or a seller strategizing in today's unique environment. This article could assist you in deciding whether now is the best time to buy or sell your house in Huntsville, Alabama.





Interest Rate Shifts and Market Outlook


As buyers seem to be becoming accustomed to this higher interest rate environment, which transitioned from the high-2s and low-3s just a little over a year ago to the high-6s and low-7s this year, the market really seems to be settling out.


Many economists were predicting that we were hitting an inflection point and had truly bottomed out in terms of real estate. Depreciation in some markets, staying flat in others, and modest increases in many markets led many economists to predict that for the rest of this year and into 2024, we would see this inflection point starting from July, resulting in price and home sales increases.


Just as that happened, interest rates began to creep back up as the Fed continued to raise rates and other economic factors caused the 10-year Treasury bond, which mirrors the 30-year mortgage rate, to go up again. Currently, we're starting to see rates in the mid-7s and many economists are now predicting that we're marching all the way up to an 8 rate.


Unique Opportunity for Buyers


As we witness interest rates march up into the mid-7s and potentially reach an 8 range, I believe 8 is going to be a key psychological number. It took the market a while to adjust to 6 and then 7, I think it’s going to take the market a while to adjust again to 8.


As we move into a period with potentially 8 interest rates and a slower season as Q3 transitions into Q4, I believe this might not necessarily be the straw that breaks the camel's back, but we could begin to observe some weakness in terms of residential real estate sales pricing.


I believe Q4 will present a unique buying opportunity for many prospective buyers. Sellers will need to be more open to negotiation if they intend to sell their homes in this market. While rising interest rates pose a challenge, it's good news for buyers in terms of pricing. For those who can strategically manage interest rates or are able to pay in cash, this situation aligns with the 'marry your home day to rate' theme. In Q4, buyers will be rewarded with lower prices, and I'm already noticing new construction builders becoming increasingly aggressive in their pricing and promotions as they aim to clear their inventory by year-end. I believe this presents a unique window of opportunity for buyers to take advantage of the market.


Interest Rates, Inflation, and Election Dynamics


This presents a unique opportunity for several reasons. Firstly, I believe the Fed is engaged in a game of cat and mouse. While they've stated they're not afraid to raise interest rates if necessary, they haven't explicitly committed to further increases. Many are predicting a potential pause in interest rate hikes leading up to the next Fed meeting. In my opinion, they are attempting to bluff the market because they are aware that as interest rates potentially dip back down, especially into the mid-5 to possibly even 6 range, there are numerous prospective buyers on the sidelines waiting to enter the market. This surge in demand will outstrip the available supply.


What will this do? It will likely continue to drive inflation back up. The Fed is attempting to instill fear in the marketplace, suggesting the possibility of further interest rate hikes. This has essentially generated fear and uncertainty that is embedded in the 30-year mortgage rate.


The 30-year mortgage rate is typically loosely tied to the 10-year Treasury rate, usually about 2 above it. However, we are currently well above that, with it sitting at almost 3.5 above the Treasury rate. There is over a percentage point factored into this fear and uncertainty about the Fed's future actions. Once the market realizes that the Fed has concluded its rate-cutting measures, we could see almost overnight interest rates drop, potentially by a point or more. This, in turn, could contribute to inflation, which is likely why the Fed is engaging in this cat-and-mouse game.


The second reason why I believe this could be a distinctive opportunity, not only for Q4 but possibly extending into early Q1 of 2024, is the upcoming election year. I just can't imagine politicians sitting back and allowing us to have high-interest rates in an election year when they're trying to get reelected. While the Fed is not government-owned, there are certainly ties and pressures that can influence it. Therefore, I don't anticipate 8 rates, if we reach that point, to persist for long.


Once again, I view this Q4 as an excellent and unique opportunity for those who can navigate the interest rate landscape, whether by ‘dating the rate and marrying the home’, making cash payments, or accessing funds from sources like a 401(k) when the stock market is underperforming. I believe this is the ideal moment to acquire a forever home or make investment purchases.


Matt’s Advice


We currently have this unique opportunity for buyers. It is a challenge because they are paying higher interest rates and if they're paying higher interest rates, they are going to expect more concessions from sellers right now. Therefore, if you find yourself as a seller, especially during the slower Q4 season and you must sell your home, my advice is that you will need to be strong with your pricing and consider offering incentives, such as interest rate buydowns, to ensure the sale of your home in this market during this season.Looking to buy or sell a home in Huntsville, Alabama contact us today or call 256-333-MOVE.


 



 ]]> </description>
    <pubDate>Fri, 08 Sep 2023 14:44:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rate-forecast-2023-2024-predictions-trends-and-influential-factors.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/interest-rate-forecast-2023-2024-predictions-trends-and-influential-factors.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Interest Rate Forecast 2023-2024: Predictions, Trends, and Influential Factors</title>
    <description> <![CDATA[ 
Interest Rate Forecast 2023-2024: Predictions, Trends, and Influential Factors





Get a comprehensive understanding of the 2023-2024 interest rate forecast and the factors at play. While the recent US credit downgrade and shifts in bank ratings make headlines, our focus is on what these developments mean for future interest rates. We'll dissect the connections between credit scores, market sentiments, and economic indicators that shape these rates. Expert insights will uncover potential effects on mortgage rates and the broader real estate market. Come along as we navigate the evolving interest rate landscape in the months and beyond.


Fitch Downgrades US Credit Rating


A recent factor playing a significant role in current interest rates is the recent downgrade by Fitch Credit Ratings on the credit rating of the US Treasury Department of the US government. We were previously ranked as the safest investment in the world at AAA. Treasury bonds have functioned as the gold standard for the global market, as everything else is measured against their return – they are widely considered the safest investment globally. Well, that safest investment has now been downgraded from AAA down to AA+. This doesn’t seem like much of a downgrade, but when you're considered the gold standard and that standard is no longer at 100, it raises concerns not just for the US but for the overall market as well. This downgrade is affecting interest rates and influencing various mortgages, including 50-year and 30-year mortgages.


The rationale behind this is that if the credit of the US comes under a bit of scrutiny, then the cost to borrow, not just for the nation but also for individual borrowers within the US, is likely to see a continued increase. This is due to the fact that the 30-year mortgage is typically tied to the ten-year treasury. If the ten-year Treasury rate goes up, then so do 15-year and 30-year mortgages. This is something that's impacting rates not only here in the short term, but I think this is actually going to be a longer-term impact on rates for the foreseeable future until that credit rating goes back up to AAA, if in fact it ever does. With this recent downgrade by Fitch, it has increased the 30-year mortgage rate from the high 6’s to the low to mid 7 range.


Cuts on Bank Ratings &amp; Downgrade Watch


Speaking of downgrades, Moody's has recently taken the step of downgrading ten regional banks and has issued notices to several major banks, indicating that they're under scrutiny for potential downgrades. To me, this is a clear signal to investors that future downgrades are likely in store. A lot of regional and big national banks are in trouble right now because of their exposure to risks associated with the struggling and declining commercial real estate market as well as their ties to Treasury bonds.


Treasury bonds are typically the safest investment. Banks loaded up on ultra-low Treasury bond rates and now that rates have gone up, banks are trying to liquidate many of those Treasury bonds but the value in them has dropped. Banks are basically getting hit in both directions from both Treasury bonds and the commercial real estate side.


The reason this is important is it's obviously going to affect lending on commercial real estate, but it could absolutely spill over to the residential sector as well. This is primarily due to the diminished liquidity and reduced cash reserves within these banks. Consequently, there's a potential for an impact on the residential real estate market, particularly concerning products closely tied to banks themselves—like those they offer directly within their institution—and other portfolio-oriented products, which they retain rather than selling openly on the market. This is a factor that we need to keep an eye on long-term because it's going to absolutely affect short-term interest rates and could affect us for the mid-term until we get through this banking crisis and commercial real estate crisis.


What Investors Are Doing


Anytime we're making a prediction or wanting to know where the market is headed in terms of valuation or interest rates, it's always a good idea to look at what the smart money is doing. The Wall Street Journal recently ran an article basically looking at what informed investors are doing, and they drew the conclusion that investors are predicting that interest rates are going to be higher for a prolonged period of time. They came to this conclusion by looking at the ten-year Treasury market.


Basically, the ten-year Treasury market is a forward look at what investors think interest rates are going to do long term. The ten-year Treasury rate is actually at a ten-year high now so investors are now predicting that those rates are going to be higher for a prolonged period of time. The two-year Treasury rates are actually starting to decline. All of that packaged together basically points towards the smart money predicting that interest rates are going to stay higher for a prolonged period of time. Now, let's connect this with the 30-year mortgage rate. The 30-year mortgage rate is not actually tied to the Fed overnight rate, it's typically more tied to the ten-year Treasury rate.


Inflation’s Effect on Interest Rates


Another factor that I think points towards interest rates staying longer for a period of time is our Consumer Price Index data. One might argue, &quot;Hey, the CPI data has come in at 3, down from 9.6 just a year ago. Now it's at 3, aiming to be at 2. What's 1 among friends, right?&quot; But the thing is, the Fed doesn't just want to hit 2, they want to stay at that number for a prolonged period of time. They don't want to just hit it and bounce right back up.


The challenge here is, I'm not sure if the Fed is aware of this – though the real estate industry certainly is. I trust the Fed is also examining this data. The thing is, the last time we saw mortgage rates in the 5.5 range, our country experienced a significant surge in multiple offers for homes and homes being bid up in terms of value. So the next time we get to 5.5, with all of that demand that's sitting on the sideline, I think that demand is going to come off of the sideline and go back into the residential real estate market. With that surplus of demand, if we hit 5.5, I think we'll see double-digit appreciation in terms of real estate in terms of home values.


If home values were to appreciate by double digits, it could affect CPI data, prompting the Fed to resume raising overnight rates. This could potentially result in significant inflation. Given the current CPI at 3 and the Fed's desire to maintain a 2 target over the long term, it's likely that we'll remain at this figure for quite some time. This approach aims to prevent a sudden and substantial spike that the Fed wishes to avoid.


Interest Rate Predictions for 2023-2024


I think interest rates will start to stabilize between now and the end of the year, especially in the December timeframe when demand is a little bit lower. I think we'll see that high 6 range return and I think we'll stay there for a period of time.


I do think the Fed is going to pause its interest rate hikes in 2024. Now if they don't, I think this prediction goes out the window. But if they do pause their interest rate hikes, I think that's going to take a lot of the fear and uncertainty out of the 30-year mortgage rate which I think will transition from the high 6 range to a lower range around 6. I think we'll stay there for a period of time, it could be 12 months to 18 months. I think it could even be a couple of years as the Fed tries to get CPI inflation data down from 3 to 2 and keep it there for a period of time.


Looking at the near future, my expectation is that by year-end, we'll experience rates in the high 6 range. Moving forward to the next year, I foresee rates settling within the low 6 range. Depending on economic indicators, the severity of a potential recession, or global events, and in conjunction with the Fed's actions in reducing the target rate—where we might see quarter-point or half-point rate decreases—I ultimately believe we'll witness the return of 5.5 rates. Once that happens, we can expect a surplus of demand from those currently sitting on the sidelines.


Zillow recently conducted a poll, revealing that 25 of sellers are contemplating selling their homes within the next 24 months. This suggests a significant potential supply. As this supply becomes active, aided by lower rates, and with demand surging from first-time homebuyers and move-up buyers, I anticipate that when we reach the 5.5 mark, we will witness a resurgence of double-digit appreciation. This upswing won't be limited solely to the Huntsville market but will likely extend across the entirety of the United States.
 ]]> </description>
    <pubDate>Thu, 31 Aug 2023 13:46:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-housing-news-interest-rate-forecast-for-2023-2024.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-housing-news-interest-rate-forecast-for-2023-2024.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Interest Rate Forecast for 2023-2024 | Huntsville, AL Housing News</title>
    <description> <![CDATA[ 
Interest Rates Forecast for 2023-2024








What should you expect with housing interest rates for the rest of 2023 and into 2024? We examine the potential trajectory of interest rates by taking into account the Fed's forecast and the current climate of uncertainty. While the Fed is expected to initiate rate reductions within the next 12 to 24 months, waiting to buy a home in 2024 or 2025 might not be the wisest decision. If you're thinking about buying or selling a home in Huntsville, AL, being mindful of how interest rates impact the housing market can help you make the best decision that suits your needs and circumstances.


Despite a Pause on Rate Hikes, Expect More


Is Jerome Powell fed up yet? After an unprecedented ten consecutive rate hikes, Fed Chairman Jerome Powell announced that they are pausing rate hikes for now. This is good news for 30-year mortgage rates, 15-year mortgage rates, and it's excellent news for the economy in general. We'll wait and see what happens next.


If you look at the survey of the Fed members, about half of these members are predicting that we have an additional .5 rate hike before the end of the year. That translates to two additional .25 rate hikes. It's really possible as CPI data comes down and if inflation comes down over the coming months, that the Fed may be done with interest rate hikes but we'll just have to wait and see.


Future Interest Rate Forecasts


Here's where we're at with future forecasts. We're currently in that 5 to 5.25 range. They're anticipating and expecting 5.6 by the end of 2023 according to what the Fed members are forecasting. We can expect an additional .5 by the end of the year based on today's CPI data. They're predicting 4.6 by 2024 and then a big decrease by 2025 of 3.4. Potentially an additional 2 drop over the next 24 months is what the Fed is predicting.What's really interesting about the Fed rates and how that translates into 30-year mortgage rates is there's still a lot of fear and uncertainty baked into these rates. Typically, you look at the 10-year treasury now and then you add a bump to that to get your average 30-year rate. Normally that's somewhere around a 1.25 bump from a ten-year treasury. If you do that, we're actually at about a +2 hike versus that 1.25, which is what we typically see. So there’s about a +.75 interest rate baked into these 30-year rates due to basically fear and uncertainty. If the Fed truly does pause rate hikes, there's some room for 30-year mortgage rates to come down just because of all that anticipation of uncertainty and unknown baked into our 30-year and 15-year mortgage rates right now.


Should You Wait to Buy a Home?


The good news is we’re anticipating lower rates into 2024 and especially into 2025. If you're thinking about waiting until 2025, I would encourage you to rethink that assumption. The reason for that is how much higher the price will be in 2025. How much is that going to actually lower your mortgage payment with higher prices and then lower interest rates? The thing you want to do is marry the home and date the rate, buy the home you want now then refinance once interest rates are lower.


The other thing is if we have a 2 rate drop, we will likely have a lot of demand coming off of the sidelines and really pushing up prices again. The last time we saw interest rates in the 5.5 range, there was an extreme seller's market with multiple offers significantly driving up prices. If there is a 2 decrease, we will go even lower than that. I think the smart money is buying right now. We're still in a seller's market, but we're getting much better negotiation terms for buyers today than I think we will in 12 to 24 months when interest rates are softer.


If you're looking to take advantage of this market either as a buyer, an investor, or are looking to sell and move up or move down shoot us an email at moving@mattcurtisrealestate.com or call 256-333-MOVE.
 ]]> </description>
    <pubDate>Fri, 30 Jun 2023 12:29:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/buying-a-home-in-huntsville-al-mortgage-demand-hits-25-year-low.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/buying-a-home-in-huntsville-al-mortgage-demand-hits-25-year-low.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Mortgage Demand Hits 25-Year Low | Buying a Home in Huntsville, AL</title>
    <description> <![CDATA[ 
Mortgage Demand Hits 25-Year Low





The Federal Reserve has raised interest rates six times in 2022 which has pushed 30-year mortgage rates to the highest levels they’ve been in over 20 years. This has led to a massive decline in mortgage demand hitting a 25-year low, mortgage demand is down 4 week over week and 38 year over year.


Why Mortgage Demand Is Down 





Interest rates are pushing some buyers out of the market due to affordability, which is also pushing out a lot of potential refinances due to the higher interest rates we're seeing right now.


Rates are now back in line with what we have seen historically dating back to the pre-2000 years. This chart shows we're back to rates that we have really been seeing for most of the country’s history instead of the historically low interest rates we've experienced over the last couple of decades. So the question is, are we going back to normalcy with interest rates or are we going to see a refinancing boom over the next couple of years?


Refinancing Boom





I personally think we'll see a refinancing boom. The reason for that is due to this GDP chart. That is exponential growth over the last decade and really the last several years. With that record increase in debt, the Fed is the largest borrower of this debt. Basically, the interest rates that they are charging themselves are unsustainable at that debt level.


Most economists are predicting that they will have to decrease those interest rates over the next year, maybe a year and a half or two years, but at some point in the near future those rates are going to have to come back down.


Matt’s Advice


Here are my recommendations during this low demand and higher interest rates market that we're in right now.


One thing that we're not recommending, and a lot of people are looking at doing right now, is we do not recommend buying down your interest rate. The reason for that is going back to that GDP graph. We expect that interest rates will start to come back down, in my opinion definitely within the next 1 to 2 years, so you wouldn't want to buy down a rate just to refinance in another year or two. If you think we're going back to historical interest rates and interest rates are going to stay high for the next decade, that's when you would want to buy down the rate.


With those predictions in mind, we are recommending a couple of options. First, we're recommending looking at adjustable rate mortgages. Go ahead and look at getting that lower interest rate today versus a 30-year fixed rate since you're not likely to need that 30-year fixed rate for the full 30 years due to a potential refinance scenario. Second, if you believe interest rates will come down over the next 1 to 2 years and you're able to take on that risk, ARMs are a great option to consider.


Another option to consider is during this period of more motivated sellers, asking the seller for a 2-1 Rate Buy Down. A 2-1 Rate Buy Down lowers the interest rate from the current rate down 2 less the first year and then 1 less the second year. For example, if today's rates were 7, the first-year rate would be 5, and the second-year rate would be 6. Then when it resets to 7 in year three, based on most predictions, you would likely be looking at already refinancing that home.


With those recommendations in mind, marry the home and date the rate. Buy the home you want, then look to refinance over the next couple of years.


 



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    <pubDate>Thu, 03 Nov 2022 12:11:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-alabama-housing-market-news-does-raising-interest-rates-help-inflation.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-alabama-housing-market-news-does-raising-interest-rates-help-inflation.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Does Raising Interest Rates Help Inflation? | Huntsville, Alabama Housing Market News</title>
    <description> <![CDATA[ 
Does Raising Interest Rates Help Inflation? | Huntsville, Alabama Housing Market News





Interest rates are at the highest levels that they've been in 20 years and inflation is at the highest levels that we've seen since the 1980s. The Fed continues to raise interest rates to combat inflation but does raising interest rates actually impact and lower inflation?


Economics comes down to supply and demand. Most purchasers of big-ticket items such as boats, cars, and homes are also borrowers. Raising interest rates affects the demand for those products because the purchasers are likely to borrow less as a result.. The ‘wealth effect’ is another factor that affects demand. As interest rates rise, that typically has a negative impact on the stock market as people's stock portfolios and 401ks are worth less which also makes them less likely to borrow or purchase goods.





There are a few challenges when it comes to the strategy of raising interest rates to decrease inflation:


1) Housing is Factored Into Inflation 





In fact, it's the largest expense for most Americans whether it be your mortgage or your rent so raising interest rates only increases this expense. For example, a $300,000 loan on a 30-year fixed mortgage of 3 was $1,265 a month. Compare that to rates in the 7 range, that loan is now a $1,996 a month payment which is a 58 increase. Not only do mortgages rise during periods of high-interest rates, but it also helps justify raising rents because rents need to be somewhat in line with mortgages to help make that balanced.


2) Supply &amp; Demand Imbalance





The other challenge to decreasing inflation through raising interest rates is how it artificially manipulates demand, thus affecting supply. As you raise interest rates, that artificially manipulates the demand for housing in the economy. As interest rates rise, demand shrinks. But as interest rates shrink back down, you're going to have that demand get elevated once again. Since we already have a supply imbalance in the economy, we're not fixing that. We're actually making it worse.


We have a 5.5 million home deficit, but we're making it worse by raising interest rates. We're scaring off builders from building new construction and they're actually slowing down with these heightened interest rates. The next time interest rates do come back down in the next year or two, we're going to possibly have a more extreme imbalance in supply and demand than we do now.


We're going to have that demand once again with lower interest rates but the supply may be even more imbalanced with fewer homes currently being built. By raising interest rates, the Fed is artificially manipulating the demand in this country but not affecting the main source of challenge which is the 5.5 million home deficit.


Matt’s Advice





If you can buy a home in this market, take advantage of these more favorable buyer conditions because we're not likely to experience that as interest rates start to decrease again. By taking advantage of the more favorable buyer conditions now, you can then look to refinance as rates go back down.



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    <pubDate>Fri, 14 Oct 2022 11:53:00 -0500</pubDate>
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