Downward Interest Rates Bring a Wave of New Buyers
We all need a place to live. We all need to live within our means and budget, too. If you are reading this article, you have likely chosen to live in Benicia, or you want to live here someday. Listening to national news, however, might lead you to think your hopes of ever owning in Benicia are doomed, or at a minimum, indefinitely delayed. This article may give you an alternative perspective.
2023, without a doubt, was one of the strangest years we have ever had in the Real Estate Market.
I cannot think of another time when we had such a high demand to buy, and yet so few transactions. Inflation, market overreaction, and fear all have a part to play in this dilemma. In an effort to stem the tide of inflation, the FED raised interest rates dramatically, but there may be relief in sight.
Economists are predicting that the FED will lower rates 3 or 4 times this year.
We will see those interest rates of nearly 8% toward the end of last year drop to nearly 6% by the end of 2024. We also have the largest group of eligible buyers this country has ever seen, all waiting in the wings to either buy their first home, or upgrade, or relocate. New home construction is still woefully lagging Buyer Demand. Cities like Benicia in particular, that are nearly built out, will continue to have limited opportunities for Buyers to purchase.
It may be worth a look at purchasing now, and weathering that higher interest rate for a year or so, in order to capitalize on the current inventory at current prices. You can then refinance that mortgage next year when the rates have dropped significantly, while still enjoying the equity built into the property as the market will return to a more “normal” state.
History has proved a few things for Benicia Real Estate.
- We have very little potential growth possible in Benicia, so prices will continue to rise, and your investment will be sound.
- We have more buyers than we have units available; so the lower the interest rates go, the more competitive the market will be for the few units out there.
- Rents, while stabilized a bit, are still remarkably high due to lack of available inventory. Investing in your own home and building equity may be a better use of your housing expense budget.
- Historic data shows that a 6% mortgage rate is the tipping point, and a flood of buyers will hit the market once we reach this level.
Reality is we are not going to see sub 3% interest rates again for a long time if ever; but the days of 7% or 8% are going to be a thing of the past soon, too. Take advantage of the downward trend and purchase a home that fits your needs and budget now. If it is a bit of a stretch, know that you will likely be able to refinance that loan in a year or so anyway, while still taking advantage of today’s sales prices.