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How the Interest Rate Hike Will Affect Homebuyers

By Mike in Downtown San Diego Real Estate with 0 Comments

With all of the fluctuations in the economy lately, buying a condo or loft can be a confusing endeavor. A few days ago, the Federal Reserve raised the benchmark interest rate by a quarter of a percentage point. This interest rate increase may seem small, but it will undoubtedly affect the Downtown San Diego real estate market in many ways.

Mortgages for homes are longer term than most other loans, so the small increase in interest rates adds up over time. For example, the interest payment on a $300,000 loan at 3.95 percent would increase by almost $20,000 if the interest rate increased to 4.25 percent. When the planned increase was first announced, many people rushed to buy before getting stuck with higher interest rates. Now that the interest rate has been raised, most experts predict that there will be a bit of a lull in the housing market.

Because of the decline in interested buyers, the increase in interest rates may not actually affect the overall price of a property. Less people will be interested in buying due to the higher cost, so many sellers may choose to lower the price of their loft or condo for sale in Downtown San Diego in order to attract potential buyers. Some real estate brokers are recommending that their clients wait a short time before buying, so that the real estate market can settle back down.

Though this interest rate increase was the most drastic jump in a decade, increases in the future will most likely be more gradual. Due to the economy, the Federal Reserve may increase interests rates again soon. These increases can add quite a bit of money to overall payments. Therefore, a fixed-rate mortgage may be a better choice for homebuyers. An adjustable rate mortgage may be initially lower than a fixed rate mortgage, but the current real estate market cycle makes it probable that interest rates will continue to rise.

If you’re interested in purchasing property before another rate increase, reach out to 92101 Urban Living. We’re experts in local real estate, including Marina, Little Italy, East Village, Cortez Hill, and Gaslamp condos for sale. Give us a call at (619) 649-0368 and schedule an appointment! ')}