For our first video of 2017, we’ve got a lot to talk about.
First, we wanted to bring back Derek Lave to talk about the effect of rising interest rates early this year. We also wanted to discuss where we were last year, where we’re headed in 2017, and how it might affect you in the Long Island market.
Starting with interest rates, we must discuss Fed Chair Janet Yellen talking about raising interest rates. Derek says it hasn’t had an effect yet, but it showed that the economy can handle a higher rate in general, which boosted the bond market for a sell-off, which will make interest rates higher. People running to invest in bonds keeps rates lower, but Yellen’s words have had a big impact. Since the election, Derek points out, we’ve had a big increase in rates.
So what does ‘big’ mean, exactly? According to Derek, we can look to the 10-year treasury to see where rates are. Before the election, the 10-year treasury was floating around 1.7% or 1.6%, but it’s currently at 2.3%. That means interest rates are in the low-to-mid 3% to low-to-mid 4% range. We’ll see a little bit of up and down, Derek says, but it’s difficult to time. Overall in 2017, he adds, mortgage rates should stay where they are or be higher. The question is how high the highs will be and how low the lows will be during the up-and-down fluctuation during 2017.
Derek also points out that many experts predict higher purchase prices for homes in 2017, as well as higher interest rates and more purchases overall because buyers want to lock in an interest rate while they’re still historically low. But if rates increase back up to the 7% range in the next couple years, will it have a depressing effect on real estate prices? Derek says that with current regulations in the lending industry, everything is about your debt-to-income ratio. When interest rates go up, it means you can afford less house since you’re only able to afford a certain monthly amount.
If you’re planning to list your home, Derek says, it’s better to list now. Buyers can afford to spend more with rates being so low.
Thanks to Derek for joining us today and giving us some information that was enlightening, even for us! If you have any questions or you’re thinking about buying or selling a home on Long Island, you can ask Derek any financing questions you have by calling him on his cell at 516-658-7766.
If you have any questions for us about real estate in Long Island, don’t hesitate to give us a call or send us an email. We’d love to help!