Is it Time to Buy?

As of February 29, the rate for a 30-year, fixed-rate mortgage averaged 6.94%, according to Freddie Mac. The week prior, the 30-year mortgage rate was at 6.90%.

Last year at this time, mortgage rates were at 6.65%!  While many buyers remained on the sidelines hoping for better rates, they missed out. This is why it is difficult to wait for better rates. Over the last year, rates have consistently moved up and down – and eventually, back up.

"Mortgage rates continued their ascent this week, reaching a two-month high and flirting with seven percent yet again,” said Sam Khater, Freddie Mac’s Chief Economist. “The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying.”

Are Rates Going Up or Down?

The last time the FED raised their rate was in July of 2023. As we began January, many economists were predicting that they may actually begin cutting their rate. Their actions are directly tied to the inflation rate that they would like to see at 2%.

Inflation was reduced to 3% as we began 2024, and many hoped the February meeting would bring about a decrease. However, the FED indicated that they wanted more time to see if this level will hold.

Last year, the FED was aggressively increasing rates at each of their meetings. In their February 2024 meeting, they again chose not to increase the rate. Many believe rates will fall in 2024, but it probably won’t happen until later in the year.

Strong Economy

February economic reports showed that our economy is growing rapidly, which is good news. However, the FED uses their rate to curb inflation. Job numbers are up and unemployment is down. Unfortunately, these factors can drive prices –and inflation– up.

When these factors occur together, interest rates will climb higher. This is what we have witnessed in February and into March 2024. The overall economy grew at a 3.2% annual rate at the end of 2023.

The FED chairman indicated that they will not be reducing their rate until several months of lower inflation numbers indicate that the economy is slowing down. Their efforts have reduced inflation from 6.6% in September of 2022 to 3.9% in January of 2024.

Luxury Market Strong

The stock market has reacted favorably to the FED not increasing rates, and appears to be betting on lower rates in the future. At the same time, strong economic reports are also driving a strong bull market. The luxury real estate market tends to mirror stock market activity. We have seen this segment outperform other price points at Lake Tahoe.

The FED’s tight monetary policy will probably hold for the next several months. Buyers who moved to get a mortgage last September, got better rates than what can be found today. However, supply and demand means that less buyers competing can lead to lower home prices.

What one may pay in additional borrowing costs, can be recouped with a lower purchase price.

In conclusion, deciding when the right time to buy might be better focused on desire. It is important to have your finances in order so you can move to buy if and when rates come down again.

Contact me today for more information about homes for sale in the Lake Tahoe and Truckee real estate market.