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Will The New 4+% Mortgage Rates Impact California Home Prices?

March 5, 2017

By now, many of us have heard through news or advertising that a small change in mortgage rates can make a big difference. In Marin County a home price is a big consideration when selecting real estate in this most desirable market. Interest rates will also be an important consideration, particularly for first time home buyers on a limited budget.

Will a 5% mortgage rate make a substantial difference in the price of your new home? What about your monthly payment? Some experts believe that change won’t be noticeable until the figure rises to 5%. 

Interest Rates are Still at a Record Low

Interest rates have been 3.5-4.5% over the last 5 years, compared to 18% or more in the early 80’s. Today, we are at 4.2%.

Mortgage rates for Marin Home Buyers 1972 to 2017

Mortgage rates for Marin Home Buyers 1972 to 2017

What Will It Cost You if Mortgage Rates Climb to 5%?

Today, the interest rate for a conventional mortgage (maximum mortgage of $636,150 in Marin) is 4.2%. If the rate increases by a total of 1% (to 5.2%), your monthly payment would increase $60 for each $100,000 of your loan.

What Will Happen to Mortgage Rates if the Fed’s Interest Rate Increases?

The media is filled with concern about the effect of the Federal Reserve policy on interest rates. Is this concern justified? The recent history of mortgage interest rates tell a different story. Here is an expanded view of what happened:

Mortgage rates for Marin Home Buyers 2015 to 2017

Mortgage rates for Marin Home Buyers 2015 to 2017

  • Over the past 17 months, interest rates have remained LOW: between 3.4 and 4.2%.  These are great rates!
  • When the Fed raised their rate by 0.25% in December 2015, interest rates WENT DOWN!
  • When the Fed raised their rate another 0.25% in December 2016, interest rates went up from about 3.5% to 4.16%. However, the increase in mortgage rate went up BEFORE the Fed’s increase in December. In fact, the rate went up about the time of the presidential election. 
  • For three months after the Fed’s increase, the mortgage rate has held steady at about to 4.2% (through March 6, 2017).

UPADTE

The Fed rate increased again by 0.25% on March 15, 2017.   The next day the average 30-year mortgage rate went up to 4.3%, but today (March 23) it is down to 4.23%.

What Does This Mean?

Over the last year, mortgage interest rates have not depended strongly on the Fed’s interest rate. There must be other economic and political factors in play. Don’t buy all of the media concern about Fed interest rates.

The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are all projecting that mortgage interest rates will move upward in 2017. Increasing interest rates will definitely impact purchasers and may stifle demand.”  From Simplifying The Market.

Here is a clear and simple discussion of the link between the Fed interest rate and mortgage rates. Here is a simple Summary: “The Federal Reserve has no direct connection to U.S. mortgage rates whatsoever.” The indirect connections through the national inflation rate and the bond-secured mortgage market, influence the direction of mortgage rates.

“Mortgage rates are made on Wall Street.” This is where politics and economic pressure take hold.

Consider Acting Now

If rates are rising, of course it always provides motivation to move more quickly whether buying or selling a home in any of our real estate market areas from Novato to Sausalito.

Filed Under: Marin County Market Trends, Marin Real Estate News Tagged With: Belvedere, Condo, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Madeline Schaider Real Estate, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, Single Family Home, Tiburon, Townhome, West Marin

Madeline Schaider

Madeline Schaider

Marin County Real Estate
(415) 515-9357 Mobile/Text
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5 Essential Tips for Home Buying That a Typical Realtor Might Overlook:

1. Trust Your Instincts: While data and market research are critical, don't undervalue your personal feelings about a home or neighborhood. Your comfort and gut feeling play a significant role in making a house a home.

2. Engage with the Community: Before buying, visit the local coffee shop, park, or community center. The firsthand experience will offer insights into the neighborhood vibe and its residents that online reviews can't capture.

3. Work with an Experienced Realtor: Buying or selling a home requires a board range of skills, from understanding legal issues to effective negotiating.  Partnering with an experienced realtor who truly knows the ins and outs of the industry can be invaluable.

4. Plan for the Unexpected: Whether it's future personal needs, market fluctuations, or unforeseen home repairs, always have a contingency plan or savings for unexpected events.

5. Evaluate the Morning and Night Ambiance: Visit the property at different times of the day. What might seem like a quiet street during your midday visit could be a noisy commute route by evening. The difference in atmosphere can significantly impact your living experience.

Madeline Schaider Real Estate
📲(415) 515-9357

#marinrealestate #marinrealtor #findyourdreamhome #bayarearealestate #movingtomarin #sfbayarea #californiarealestate #marincounty #livinginmarin
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Madeline Schaider Real Estate

(415) 515-9357 Mobile/Text
madeline@livinginmarin.com
CA DRE# 01082913
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