Real Estate Watch – Al Rex
Real Estate Under a Trump Presidency
Impact on Mortgage Rates Is a Key Factor
As President-Elect Donald Trump prepares to take office, many questions arise in regard to the long-term impact of his forecasted policies in many different areas, and certainly the real estate market is one of them. Most experts I’ve consulted with have a “wait and see” attitude on how his policies will shape the value of your home, but all agree that an eventual rise in mortgage rates could slow down our recent run-up in home values.
Our president-elect has already made well known the several areas he plans to target. Many are aimed at a healthier economy and can have a “positive rippling” effect on housing. We are also aware of the commitment by the Federal Reserve to increase the short-term lending rates, which may have a “negative” effect on both mortgage rates and home values.
There is one key factor where many of us agree – an eventual rise in mortgage rates can reduce a home-buyer’s “purchasing power,” which can have a related negative effect on average home prices. For example: at a medium mortgage level of $500,000, an eventual 1% increase in interest rate will result in a $60,000 reduction in purchasing power, as the buyer’s monthly payment will increase by approximately $297 per month. At higher loan levels the reduction in purchasing power is even more significant. For a $750,000 loan, a 1% increase in mortgage rates will increase the buyer’s monthly payment by $445 per month, resulting in an $85,000 reduction in purchasing power.
Two key indicators to watch in 2017 that can impact our mortgage rates are:
1. The Federal Reserve did raise the short-term borrowing rate by another .25% in December, and announced the potential for more aggressive increases in 2017.
2. The 30-year treasury bonds have long been a leading indicator that tracks in step with mortgage rates. The overall health of our economy – mostly measured by the stock market (DJIA) – can inversely affect the 30-year treasuries and eventually, mortgage rates as well.
Our Southern California residential market typically starts to become increasingly active as the spring months commence, so keep an eye on these two indicators and I’ll keep you updated on our average home values. Please feel free to contact me by phone or e-mail if you have any questions.
Realtor • BRE# 01377312
7030 Avenida Encinas, Suite 100,
Carlsbad, CA 92011
760-473-8572 • Al@AlRexRealty.com
Al Rex has been a top selling realtor in Carlsbad for the past 12 years, where he and his family reside. Visit his website at www.carlsbadhousefinder.com to get updated MLS information, or to find a floor plan for your own home.