Federal law states that banks are required to keep a minimum amount of cash on hand. This is called the reserve requirement.

But bank balances aren’t constant, as customers deposit or withdraw their cash. As a result, banks sometimes need to borrow money from other banks, overnight, to meet their reserve requirement.

The federal funds rate is the interest rate that banks charge other banks for these overnight loans. The central bank of the United States, the Federal Reserve, aka the Fed, is responsible for setting the federal funds rate. When the Federal Reserve changes this rate, it impacts everything from employment to the production and price of goods and services.

That said, there are two questions at hand: How could interest rate changes affect the housing market in general, and how could it affect your ability to buy or sell your own home?

If mortgage interest rates rise and everything else stays the same — borrowers have the same income and same debt levels — the borrower won’t qualify for as expensive of a mortgage as they previously could. For example, if a borrower qualifies for a maximum monthly payment of $2,000 per month, and mortgage rates rise, then interest will gobble up a bigger chunk of that $2,000, leaving less space for principal.

This could put home buying out of reach for some, or put stagnant or downward pressure on home prices.

But an alternate scenario could also unfold.

If employment rises, or salaries and wages grow, or consumer debt falls, or lending criteria loosens, then borrowers may still qualify for similarly-sized or larger mortgages.

For example, if a potential homebuyer gets a $10,000 annual raise and their unemployed spouse finds part-time work, then their borrowing qualifications improve. If they use some of this additional income to pay off their consumer debt, then their borrowing qualifications improve even more.

Sure, interest rates may rise. But this uptick could be offset by other economic factors that improve borrowers’ positions.

The outcome isn’t as simple as assuming higher interest rates are bad for the housing market. A variety of factors, from wages to employment to lending requirements, influence the number of homebuyers in the market and the maximum price of homes for which they qualify. And this impacts everything from median sale prices to the average number of days-on-market.

Furthermore, real estate markets are inherently local. Working with a realtor who is local and knows exactly how to help you in your specific market is important. If you have any questions about anything real estate related, I would love to help you through it.

It is officially March and the start to a new month!

In the March issue of our newsletter you will find events this month, featured listings, market predictions for 2022, and how to follow us on social media.

Click the attachment to check it out!

Please don’t hesitate to reach out with any of your real estate needs.

March Newsletter

Owners who postponed selling during the pandemic – perhaps waiting for a sign that price increases were slowing – appear ready to list their home within the next six months. Many, however, plan to overprice it – and they expect bidding wars to push the final price even higher.

A survey conducted by HarrisX for realtor.com, however, suggests that many of those people might be planning to list their home in 2022, with 65% of them planning to do so this winter and spring. Many sellers, however, want to set an asking price higher than they think their home is worth, and they expect buyer bidding wars. Early 2022 home listers may have an advantage, “As buyers race against the clock of rising mortgage rates, sellers who price their homes in line with today’s market and stick to their plans will likely see their expectations met.” says George Ratiu, manager of economic research for realtor.com.

When will sellers list?

• 65% in the next 6 months
• 19% have already listed
• 36% are researching and preparing to list

Top reason for selling? More time at home during COVID

• 33% want more home features
• 37% need more space
• 32% want to move closer to friends and family

Seller expectations

• they want to make a profit
• will ask for more than the value
• want a quick close

Price range changes

• Sellers with homes at the core of the market ($351,000-$750,000) remained the same over March (29%). However, more sellers plan to list in the $500,000-$750,000 price range.
• More than three-quarters (77%) of prospective sellers would be willing to accept a lower offer to close quickly versus just over half in March (54%).
• Compared to spring sellers, a higher number plan to take alternative routes to moving out, such as living with family initially (19%) or temporarily renting their home back from the buyer (29%).

If you have been holding off from listing because of the pandemic, now is the time to move forward.

It is officially February and the start to a new month!

In the February issue of our newsletter you will find events this month, a featured listing, market predictions for 2022, and how to follow us on social media.

Click the attachment below to check it out!

Please don’t hesitate to reach out with any of your real estate needs.

February Newsletter

The fear of missing out on low mortgage rates could “supercharge” the housing market ahead of the spring homebuying season, but not necessarily in markets where inventory is scarce.

While rates are expected to increase steadily throughout 2022, many potential home buyers may try to jump into the market now before rates rise further. The fear of missing out on low rates, or ‘FOMO,’ and the potential loss of house-buying power may supercharge the housing market ahead of the spring home-buying season.

First American’s analysis of the potential impact of rising rates shows house buying power would fall by $36,000 from November if mortgage rates are at 3.7 percent when the spring home-buying season kicks off, and by $52,000 if they hit 4.0 percent.

While forecasters hadn’t expected to see rates at that level until later this year or next, rates have been headed up sharply as investors reconsider how aggressive the Federal Reserve will be in fighting inflation. But inflation is also boosting many families’ incomes, and rising household income could offset all or part of the impact rising mortgage rates have on housing affordability. If household income keeps increasing as rapidly as it did in November — approximately 0.6 percent — through the end of 2022, the decrease in homebuying power with mortgage rates at 3.7 percent would be $700, instead of $36,000, Fleming said.

Of course, if home prices keep going up, homebuyers could still find themselves being priced out of homes they could have afforded if they’d gotten off the fence.

Rising interest rates can affect how much home you’re able to buy. If you’ve been even slightly interested about jumping into this real estate market while you can, let’s talk about your options and what this all means for you.

It is officially January 2022 and the start to a new year!

In the January issue of our newsletter you will find events this month, a featured listing, market predictions for 2022, and how to follow us on social media.

Click the attachment to check it out!

Please don’t hesitate to reach out with any of your real estate needs.

January Newsletter

While we may lead busy lives, helping the community is something that we should always make time for.

Volunteering is a great way to connect with people and could include donating money, supplies, time, or resources. Here is a list of some organizations that can always use help:

1. United Way of Marion County
2. March of Dimes – Marion County
3. Foster Florida
4. Arnette House
5. Humane Society of Marion County

A simple act of kindness also goes a long way. Bake some cookies for your neighbors, pay for someones order in the drive thru, hold the door open for the person behind you, tip your servers well at restaurants, or even just a smile can make someones day better. Show some kindness during this holiday season because you never know what a difference it could make it another persons life.

It is officially December and the last month of this year!

In the December issue of our newsletter you will find events this month, featured listings, market predictions for 2021, and how to follow us on social media.

Click the attachment to check it out!

Please don’t hesitate to reach out with any of your real estate needs.

December Newsletter

Homebuyers today are facing a huge dilemma. There simply aren’t enough homes for sale.

Nationwide, there were 1.27 million active listings in September, down 13% from the previous year. According to the National Association of Realtors, that’s about 2.4 months of inventory, which is far less than the six months that is generally needed to strike a healthy balance between supply and demand.

Given the limited number of available properties, if you’re a buyer in today’s market, you may need to expand your search to include both new construction and resale homes. But it can feel a little like comparing apples to oranges.

Let’s take a closer look at some of the factors you should take into account when choosing between a new build or an existing home. 

TIMEFRAME

How quickly do you want (or need) to move into your next home? Your timeframe can be a determining factor when it comes to choosing between a new build or resale.

New Build

If you opt for new construction, you may be surprised by how long you have to wait to get the keys to your new digs. Currently, many home builders are dealing with unique challenges brought on by the COVID-19 pandemic, including rising costs, labor and material shortages, and shipping delays. While historically it took around five to six months to build a home, many builders are now reporting construction timelines closer to a year or more.

These issues have led some builders to cancel contracts or raise the price on unsuspecting homebuyers long after agreements were signed. Unfortunately, this scenario can throw a major wrench in your moving plans and significantly delay your timeline.

To minimize these types of surprises, it’s crucial to have a real estate agent represent you in a new home purchase. We can help negotiate better contract terms and advise you about the potential risks involved.

Existing Home

If you’re in a hurry to move into your next residence, then you may want to stick to shopping for an existing home. 

You can typically move into a resale home as soon as you’ve closed the deal. The average time it takes to close a home purchase is around 51 days, but it can vary based on loan type and market activity.

If you need to move even sooner, it’s sometimes possible to close faster, especially if you’re a cash buyer. In fact, many sellers prefer a quick closing, so it can give you an advantage in a competitive market. 

LOCATION

From commute to construction to amenities, there’s a lot to consider when choosing your next neighborhood.

New Build

With a brand-new home, you’re more likely to move into a neighborhood that’s located on the edge of town and is still undergoing development. This could mean a longer commute and ongoing construction for some time. 

However, new developments can also offer a lot of amenities that appeal to modern homebuyers. Water features, hike-and-bike trails, tot lots, and dog parks are just a few of the enhancements we’re seeing pop up in master-planned communities across the country. And some feature new schools and their own urban-like centers with restaurants, retail, and office space. 

Existing Home

An existing home is more likely to be located close to town in a neighborhood with mature trees, established schools, and a deeply-rooted community. As a result, you may find the neighborhood’s trajectory to be more predictable than an up-and-coming area. 

But the amenities may be lacking and the infrastructure dated when compared to newer communities. And while some homebuyers love the charm and eclectic feel of an older neighborhood, others prefer the sleek and cohesive look of a newer development.

MAINTENANCE

Are you a DIY enthusiast, or do you prefer a low-maintenance lifestyle? Set realistic expectations about how much time, effort, and money you want to devote to maintaining your next home.

New Build

When you build a home, everything is brand new. Therefore, in the first few years at least, you can expect less required maintenance and repairs. A 2019 survey found that millennials’ homebuying regrets often came down to maintenance issues, rather than other concerns. So if you would rather spend your weekends exploring your new neighborhood than fixing a leaky faucet, you may be happier buying a turnkey build. 

That doesn’t mean, though, that a new home will be entirely maintenance-free. In fact, depending on the builder, you could find yourself repairing more than you expected. Some home builders have reputations for shoddy construction and subpar materials, so it’s important to choose one with a solid reputation. We can help you identify the quality builders in our area.

Existing Home

No matter how good a deal you got when you purchased it, you could come to regret buying an older home if it costs you heavily in unexpected maintenance and repairs. According to HomeAdvisor’s yearly True Cost report, home renovations have grown more expensive in recent years. For example, installing a new HVAC system could cost you $5,371 on average. And you can expect to pay nearly double that amount ($9,375) for a new roof.

Fortunately, there are ways to prepare for these large expenditures. We always recommend that our buyers hire a certified home inspector, whether they buy a new or existing home. Once we have the inspector’s report, we can negotiate with the seller on your behalf for reasonable repairs or concessions.

DESIGN

Open floor plan? Kitchen island? High ceilings? Must-have design features could drive your decision to build or buy resale.

New Build

With a new home, you can bet that everything will look shiny and perfect when you move in. Builders tend to put a lot of emphasis on visual details and follow the latest design trends. For example, newly-built homes are likely to feature an open floor plan, central kitchen island, and 9+ foot ceilings, which are must-haves for many modern buyers. They are also unlikely to feature carpet on the main level or laminate countertops, both of which have lost mass appeal.

However, some buyers complain of the cookie-cutter feel of new homes since they are often built with a similar aesthetic. That doesn’t mean, though, that you can’t incorporate your own style. We can help you negotiate custom features and upgrades to personalize the space and make it feel like your own.

Existing Home

In some of the most coveted neighborhoods, an older home with classic styling and character can be highly sought after. But unless the previous homeowners have invested in tasteful updates, an existing home is also more likely to look dated. 

While some buyers prefer the traditional look and character of an older home, others crave something more modern. If that’s the case, we can help you find a resale home that leaves enough room in your budget to renovate it to your liking.

WHICHEVER PATH YOU CHOOSE, WE CAN HELP

When it comes to choosing between a new build or an existing home, there’s no one-size-fits-all answer. There are numerous factors to consider, and you may have to make some compromises along the way. But the homebuying process doesn’t have to feel overwhelming.

We are knowledgeable about both the new construction and resale home options in our area, and we can help you make an informed decision, negotiate a fair price, and avoid mistakes that can cost you time and money. So give us a call today and let’s start searching for your next home!