The hottest topic in our Sarasota real estate market is not the low inventory and increased sale prices. It is the rise of the mortgage interest rate.
Are we surprised? No, we in the housing market are not surprised. The Federal Reserve needed to increase rates to combat the current rate of inflation (7.5%), the highest in 40 years to slow down a strong U.S. economy. Inflation occurs when there is a surge in demand for products and services and consumers are willing to pay more for those products and services. Simply stated: Demand is rising faster than supply.
In an effort to make sound monetary policy decisions in our current environment, the Federal Reserve policymakers raised the Federal Funds Rate (FFR) to slow down the economy and ensure price stability. The FFR impacts everything from Annual Percentage Yield (APY), the money you earn on bank accounts, to the rate you pay on your credit card balances. The FFR effectively dictates the cost of money in the United States.
The Federal Reserve policymakers have decided to be more aggressive in increasing the FFR, which could see (.50%) hike in the future. An example was last week’s rate hike, in less than 24 hours the consumer witnessed the 30-year Fixed Rate mortgage jump from 4.25% to 4.875%. Economists are expecting to see 3 to 5 rate increases in the year 2022.
What does this mean for the Sarasota housing market? To answer this question, we need to look at the bigger picture. Rising oil and gas prices, supply chain disruptions, the aftereffects of a global pandemic, and Russia’s invasion of Ukraine, impacts all markets not just the housing market.