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Interest Rate Increase

The Federal Reserve raised key interest rates Wednesday. The move, they say, is to curb inflation.

That has impacted many of the loans you may need to buy a house or car.

Douglas Braff spoke with a State College real estate agent about how this could impact people buying houses.

It’s been a chaotic few years in the national real estate market, to say the least. But the Federal Reserve raising interest rates is already proving to be the next big disruption.

In fact, since the rate hike, the typical 30-year mortgage rates have risen to their highest since August 2007. Freddie Mac reported Thursday, after the Federal Reserve’s announcement, that the 30-year rate jumped to 6.29%. Last week, they were at 6.02%.

But how do interest rates influence mortgage rates? State College real estate agent Janean Chandler, of Keller Williams Advantage Realty, broke it down for us on Thursday.

“Mortgage rates tend to rise as the Fed raises rates in general, but they tend to follow the 10-year treasury bond,” she explained. “So, feds don’t actually have control over bank rates. However, banks do look to the Fed to try to predict how much of a return they will receive on the money they loan. So, they’re always in anticipation, you know, looking to what the feds do.”

As she noted, when rates are higher, it costs more to borrow from the bank.

“That’s gonna sort of flush out buyers and we’re gonna end up with less buyer demand,” said Chandler. “But in an already tight market, such as State College, that doesn’t necessarily impact this area as much as it would, maybe an area with a lot of homes, with lots of builders, and lots of developers.”

Chandler also pointed out that since the Great Recession, in State College, “a lot of local builders went belly up and went under and just didn’t come back. So, there has been a housing shortage here for at least a good 12 years, maybe longer.”

However, she mentioned that “it’s still not equal footing between the seller and the buyer. It’s still a little skewed towards the seller when there’s a home shortage.”

Chandler herself has seen the competition for listings heat up and cool down throughout the pandemic.

“Compared to last year, when, you know, rates were lower and homes were finally coming back on the market kind of post pandemic, you’d see more and more listings. It was like a mad dash,” the real estate agent recalled.

“So, a lot of my buyers were competing against 10, 15 different offers all at the same time. You’re not seeing that as much with the higher rates.”

At a time when people have become increasingly antsy about buying a home, Chandler says to not overlook the long-term.

“I think if you know that you’re gonna be in the home for, you know, seven to 10 years, likely today’s rates will drop and that gives you the opportunity to refinance at a lower rate.”

It typically takes a while to see the true ramifications of such a change on the housing market, with a broader lens. So, we’ll have to see in the next few months how the market reacts and adapts.

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