Interest rates this year have jumped to levels we haven’t seen in years. This is in response to the action being taken by the Federal Reserve Bank to combat inflation. The Fed tool for controlling inflation is the Prime Rate. Raising the Prime Rate, the interest rate charged to its member banks, triggers a corresponding rise in all other interest rates like those for home mortgages, credit cards or bank loans.

This is a significant change to what we have enjoyed for nearly 14 years, record low interest rates on almost every area of borrowing. These historically low rates were the result of the financial melt down in 2008.

You can’t turn on your TV without some reporter using this subject as the lead story. This “sky is falling” theme is not a true representation of our healthy real estate market. It does not reflect the long history of increasing value in housing.

History is on the side of those who invest in the real estate market!

The experienced professionals at CRES recognize that the phase we are in is a part of a normal historical pattern and there are real reasons to be optimistic about the real estate market.

Interest rates are like elevators, they go up but they also come down. As you may have heard, the last time there was a need to fight inflation was in the early 80’s. That’s true, but our situation today is far better.

What was the Prime Rate in early 1980? It was an astounding 22% compared to the current 3.25%! Home loans were in the 14-15% range. However, the real estate market did not collapse. It adjusted. People still pursued their dream home purchases and everything adapted to a new normal. When rates dropped, loans were refinanced. Savings were realized.

But most significantly, housing value continued to remain firm. The long term strength of real estate is demonstrated when considering that a home priced at $100,000 during those super high interest rates of the 80’s is now worth $322,000 in 2022. Short term interest rates impacted many factors but never over a long period.

Why is 2023 a good time to buy a home?

According to financial reports and our own personal observations, inflation is starting to come down. Gas has dropped nearly 40% on average from the highs earlier this year. Supply chain issues, impacting prices are getting under control as evidenced by the full shelves of retailers gearing up for the holiday season. Massive government cash infusions, which drives inflation, provided during the COVID pandemic is over.

As a buyer during those red hot months, it was not uncommon to find yourself in a bidding war with multiple parties. Waiving inspections, which CRES never supported, were sometimes expected. Negotiating a price concession over property conditions was tossed out the window.

Sanity has returned to the market and so have normal buying procedures. Even though you may pay more interest the principal owed can be less. Five years from now, the home you buy today will probably have appreciated more covering than any extra out of pocket costs assumed on an interim basis.

Let CRES help find what is perfect for you.

CRES continually monitors the lending market. They know where the hidden gems are that will allow you to purchase the home you need to meet a changing situation. They can be your resource navigating this complex market and will be there to help you when it is appropriate to restructure your loan.

There are many variables that go into a home purchase and it is not always the interest rate. Down payment percentages, length of the mortgage, qualification for special government programs, fixed versus floating rates and other factors need to be considered. I know it is confusing but that is why you rely on experienced professionals at CRES.

Renting may be another short-term solution until financial conditions are better. CRES has a portfolio of options for you to consider.

The take away from this article is that you should not be deterred from pursing your long term goals. CRES can help whatever path you choose to follow.