With the Fed announcement on rate hikes today, we’re looking at a deeper cut than just higher mortgage rates. Homebuilders can be immensely affected by their decision. Although the housing market has improved the last few years and homebuilders are back on the rise, this could once again slow that down.
With more people expected to buy in 2016, where does that leave the need for homebuilders? The Fed announcement could easily make that statement even more surreal for homebuilders.
The announcement is starting to look better and better the closer we come to it. Right now we’re predicting that rates will increase, but on a slow, steady scale.
We also haven’t seen a rise in home purchases, even though most potential homebuyers know the rates are going up. This isn’t necessarily a bad thing, but some economists are thinking there should be more urgency for those currently looking for homes. In the long run, rates will potentially be raised 1 percentage point over the next few years, but that could add up and cost a buyer close to 12% more in monthly payments.
Another measure of the housing recovery slowing will be if the number of first time homebuyers increases in the market. According to a recent study, 20-35 year olds who weren’t married was around 30%. Now that number is around 62%. Millennials just aren’t settling down and buying houses like history has shown.