My friend Jay Vorhees at JVM Lending wrote another interesting end-of-year blog recently, regarding rates. Despite the Fed increasing rates for the 4th time in 2017, they are still down. Why is that, and how does it affect you?
In Jay’s blog, he notes that 30-year fixed rates have fallen 1/4 percent over the last year even though the Fed has done four increases. On that note, he asks why the Fed’s rate increases don’t push up mortgage rates?
In response, Jay gives two main reasons:
- Short-term rates don’t always affect long-term rates
- Many factors (besides the Fed) influence rates
Inflation, geopolitical strife, economic news and demand for credit and bank loans are the other main factors named by Jay. Most of those are very relevant in today’s societal and political climate. Basically, the Fed helps influence rates, but isn’t the sole influencer – if investors are pushed out of stocks or bonds into the other, due to war, a poor week on the stock market, etc., rates will change just as rapidly.
So, what does this mean for you? Rates are going to continue to fluctuate. They are still low, so if you are considering buying, it might be a good time to get off the fence and make a move in 2018!
My sons are Millennials. My Walnut Creek Lifestyle freelance writer is a Millennial. More and more of my clients and colleagues are Millennials, as that generation continues to age into home-buyers.
So, realtors like myself are starting to notice more trends with the market geared toward that age group. It’s a different real estate market for Millennials than it was for their parents – nowadays, they are graduating with huge student loan debts, having trouble finding lucrative work out of college, and then struggling to pay sky-high rents and mortgages once they do get jobs.
That said, Millennials are driving the real estate market right now, which has made the following observations more obvious.
From San Francisco realtor John Solaegui:
- There is a low inventory of single-family homes in San Francisco
- Millennial buyers don’t care about parking spaces (though this might be more prevalent in San Francisco – it’s contradicted by the graphic above!) with the rise of ridesharing apps – they’d prefer having decks or gardens for outdoor entertaining
- Areas like Noe Valley, Glen Park, Bernal Heights and The Sunset in San Francisco are extremely popular with Millennial buyers right now
From the California Association of Realtors’ REALTOR Magazine:
- Millennials are cashing in on equity at a historic rate, thanks to rising home prices
- One-third of Millennials say they are considering applying for a HELOC (home equity line of credit) in the next 18 months – much more than Gen-X or Baby Boomers
- HELOC’s are popular with Millennials because they can consolidate debt and afford home remodels with them
I think this is an interesting trend in our market. Home prices are high, but so are the debts and loans owed by Millennials, so we’re seeing more and more interest in new ways around that issue. And even more interestingly, Millennials are changing the way we market homes – who cares about parking when you don’t have a car, right?