Since the beginning of the year, there has been endless speculation about when the Fed was going to increase interest rates. First it was mid-year, then it was September, and now some say it won’t be until next year. Sooner or later it is bound to happen, but the question is: how much will it affect the market here in the Bay Area?
When the Fed increases interest rates, banks tend to eventually increase their loan rates. Generally when this happens some amount of buyers are pushed out of the market - less demand equals lower prices. But in regions like the Bay Area, where the housing market is saturated with buyer demand, it would take a pretty large jump in rates to throw any sort of wet blanket over the market. And with the Bay Area nearing full employment (unemployment < 5%), and incomes generally on the rise, there is plenty of reason to believe that any effects on buyer demand resulting from a rate increase would be negligible.
What we may see is a slight spike in demand in the coming months, as borrowers try to lock in their rates in anticipation of the Fed increase. Either way, the effect of the Fed’s impending rate increase on the Bay Area’s housing market should be minimal.
If you have any questions regarding the impending Fed increase and what it may do to your purchasing power, feel free to give me a call. I'd be happy to refer you to one of my trusted loan advisors.
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