FROM THE DESK OF RON RESTAINO
More of the same… only better!
As was widely predicted, the Federal Reserve announced on July 31 that they were cutting the Federal Funds rates by 1⁄4 of one percent. The move, which has been widely anticipated for weeks, was described by Fed Chairman Jerome Powell as “an insurance policy against potential speed bumps for the economy, including rising trade tensions and a slowdown in global growth.”
While cutting the Federal Funds rate doesn’t have a direct relationship to home mortgage rates, the “trickle down” effect of lowering borrowing rates for banks eventually lowers their overall cost of doing business. This hits the streets where we live in the form of lower-priced mortgages, auto loans and other lines of credit. And who doesn’t like a lower mortgage or car payment?
Filtering this news into our local real estate market data we can reach a couple of well founded conclusions. Once again in 2019, inventory has not kept up with demand. Dane County listings for June 2019 were down nearly 5% from the year prior. When listings are down, sales will understandably suffer, since there are fewer homes for buyers to buy. One doesn’t need to be a senior economist to know what happens when a large group of buyers go after a limited supply of any commodity: Prices Increase. Nothing new here, but what lies ahead for real estate is truly exciting.
Good News for Sellers: With interest rates on the decline, more buyers will qualify for mortgages. More buyers mean a faster sale. We all know that when it is time to move, every seller wants to get going now, not 3 or 4 months from now. Sellers will continue to enjoy strong sale prices providing more equity to make the move up to your next home.
Good News for Buyers: Despite the rising prices, home affordability may actually improve. Lower interest rates mean lower monthly payments and, truth be told for all of us, price is only a component for reference. Affordable monthly payments are really what concerns every buyer. If your payment is more affordable, you are more comfortable and have more money left over at the end of each and every month. Selling price can actually become somewhat of a moot point.
More Good News for Buyers: Another rarely mentioned component of lower interest rates is that your mortgage balance goes down faster in the early years. Building equity faster is important to all of us regardless of whether you are talking about a near term move up or a retirement decision. We can all win when interest rates are low.
Whether you’re a buyer or a seller, Restaino & Associates would like to help make your next move a WIN/WIN. We are professional real estate counselors who have earned our reputation by building long term relationships with the people we serve. We look forward to building that same relationship with you.