In July 2019, the Fed cut rates by a quarter point, which was the first rate cut by the central bank in more than a decade. Due to the current political policies being presented, the war on tariffs, and the President’s reports on market expectations, the policy making Federal Open Market Committee dropped the target range from 2.25% to 2%.
Unless you are working in the industry of finance, politics, real estate, etc., you most likely are unaware of how this news impacts you as a homeowner. We want to educate you on why this news it is important and how is can benefit you if you are looking to move!
Understanding the Economy:
Let’s simplify how the Fed funds rate impacts you as a homeowner…
The Fed funds rate is the interest rate banks charge each other to lend Federal Reserve funds overnight. As this rate increases, it becomes more expensive for banks to borrow from other banks.
Then, the banks lend to the consumer – this is what we know as interest rates.
The spread (or the difference between the Fed funds rate and the banks interest rate) is the return that your lender gets by providing you a loan.
Therefore, if the Fed cuts rates, then you have the potential to get a lower interest rate. However, this is not always valid. It is up to the bank to determine at what rate they want to lend to homeowners – if the Fed cuts rates, the bank can leave their interest rates the same so that they can increase their overall return.
How Does the Current Fed Increase Affect Homeowners?
If you own a home, are considering moving, or are interested in buying a home, the fluctuation in the Fed reserve affects you. Here’s how…
As A Current Homeowner
If you currently own your home, then you are in an advantageous position to sell. The buyer pool increases when the interest rates are lowered; this is because people can borrow money at a cheaper price. Therefore, with a larger buyer pool, the more potential interested parties are in the market. In some areas of the country, this can even drive home values up. This is especially true in areas where there is low velocity or few homes available for sale.
As A Potential Home buyer
This may be obvious, but you can now get money at a lower rate. However, be sure to conduct your due diligence when getting a loan for your next home. As mentioned above, not all lenders reduce their rates just because the Fed reduces their rate; therefore, as a potential home buyer you should shop around. First, identify how much you have to put down on the home and which loan you qualify for – there are conventional loans, FHA loans, USDA loans, and VA loans. If you are uncertain, go talk to your local banker. Then, shop around: Go to different banks and see what kind of rate they can get you on your home purchase. The goal here is to get the lowest rate possible and to take advantage of the reduced Fed rate.
As a homeowner, don’t miss out on this opportunity! Understand that now is the time to maximize on your home if you are in the market to sell. If you want to learn about the value of your home and how the current economy is impacting the price of your home, contact us today and receive a free home appraisal.
We are all-cash investors in Baytown and we provide clients with home evaluations. Our evaluations are not the price to take your home out to market, but instead the amount we can put in your pocket this week!
Our company specializes in purchasing residential and commercial properties in Houston and its surrounding areas. We not only supply clients with the ability to sell their home for cash; in many situations, we allow our clients to rent or owner finance from us as well. Our staff has purchased hundreds of homes in all cash throughout the years, in addition to offering sellers fair market prices for their homes with closings in a matter of days.
Our mission is to provide sellers a fast, easy and stress-free way to sell their real estate. We have been buying houses for over 15 years in Houston and surrounding areas in addition to providing the best customer service in the business. Here at Gulf State Homebuyers, we take pride in making sure our sellers feel at home and not to mention, treat them like family.