If you are thinking about buying or selling a home in 2023, chances are you've been closely watching mortgage rates and trying to gauge the best time to dip your toe into the market. Every time the Fed meets, there is much hand-wringing in the news about the impacts to consumers.
Here is the truth. The Fed does not control mortgage rates, and Fed activity does not directly impact mortgage rates. The Fed rate is simply the rate that Fed member banks charge each other for overnight loans to meet Federal Reserve requirements. These are extremely short-term rates, and have a greater impact on interest rates charged on credit cards, or interest earned on savings accounts.
However, what DOES impact mortgage interest rates is the long-term overall health of the economy. Mortgage rates oven tend to follow the 10-Year Treasury Notes, if you really want to measure it against a tangible security. This is where Fed decisions may come into play, because Treasury investors will factor in Fed movements when evaluating the overall health of the U.S. economy. And let's face it...with inflation so high and eating big holes in the pocketbooks of average Americans, the overall health of the economy seemed destined for life support just a few short months ago. So Fed action does have some marginal impact to the longer-term view of Treasury investing and interest rates.
Now we finally get to the point...the recent Fed decision to raise the Federal Reserve Rate just .25% instead of .50% is actually a good omen for mortgage rates. It means that there is more confidence in the economic recovery, a sign that inflation is starting to capitulate to Fed wrangling, and, coupled with strong jobs and unemployment reporting, seems to indicate that the "soft landing" economists were hoping for may actually come to pass. Maybe. Hopefully. You can read more about the experts' analysis at MarketWatch.
That said, I would not be doing my due diligence as a Realtor if I didn't remind you that trying to time or game the real estate market rarely works. In the long run, most people lose by waiting. You may score a better interest rate in 2024 or later this year, but you may lose the chance to buy a home at today's prices. And right now, buyers have more bargaining power than they have in the last two years. So my advice? Don't wait. If you are thinking about buying, do it now, Lock in while rates are a little lower. You can always refinance in a couple years if it makes sense.
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We are here to help! If you want to find out how much your home is worth in this strong market, email me at [email protected]. We would be happy to help you determine if the time is right for you to sell your home or buy a new home.
