Mike Bjorkman is known for being many things, including but not limited to being a successful realtor, a passionate investor, and even a philanthropist that loves to give back to the surrounding community in any way that he can. Based in beautiful California, he has many years of experience in the housing market and values the opportunity to offer his insight and expertise whenever he can.
Case in point: the recent interest rate hike by the Federal Reserve. If you’ve been paying attention to the news, you are undoubtedly aware that the Federal Reserve (also called the “Fed” for short) raised interest rates to the highest level in over a decade. But what does this mean for buyers and sellers, and what implications might it have for the market in general? Mike Bjorkman has more than a few thoughts on that.
The Fed, the Interest Rate Hike and Beyond
First, to understand the full impact of what might be coming in terms of the housing market, it’s important to understand the journey we collectively took to get to this point.
Mike Bjorkman notes that over the last several years, interest rates steadily declined to the point where they reached historic lows. This caused housing markets around the country to heat up exponentially, as it was suddenly more affordable to borrow money for a home than ever. However, this surging demand created a supply issue, and what homes were available on the market were suddenly going for sky-high prices. It became common to see people forego things that used to be a standard and accepted part of the home buying process, like an inspection.
At the same time, interest rates began to rise in a way that was having a negative impact on not just home prices but also essential everyday items like fuel and groceries. In an effort to combat inflation, the Federal Reserve began raising interest rates – including to their current high. The logic is that by making it more expensive to borrow, people will do less of it – thus encouraging people to save and helping curb inflation’s impact before it gets even worse.
So what does this mean for the housing markets around the country? Many areas have already seen things start to cool off. Homes that would sit on the market for hours (if they made it to market at all) before the beginning of a bidding war are now sitting for days and even weeks. This is one trend you can expect to continue if the Fed continues to raise interest rates into the following year, as they are anticipated to do if inflation continues to worsen.
In the short term, there will likely be fewer houses on the market for home buyers, and those that remain will be more expensive to buy. At the same time, with demand leveling off, sellers may feel like they “missed their opportunity” to get in on a historical activity level.
Mike Bjorkman says that while that may be true, it’s also important to note that the real estate industry is nothing if not cyclical – meaning that if you want to score a great deal on the house or get the absolute best price for one that you’re about to sell, time is your best friend. That and paying attention to trends in the market will truly get you far.