In short: the immediate impact of the election results on housing is a bump in interest rates from 3.5% to 4%.

The evolution of the housing market is inevitable. Regardless of who takes office, the housing market will change over the next four years. Historically low interest rates at 3.5% could not last forever. 

So what does all of this mean for housing in Orange County? 

Let’s take a look at the impact on the rise in interest rates. Buyers locking their interest rates today, compared to prior to the election, are looking at paying an additional $161 per month for the median detached home at $710,000. That’s an increase from $2,551 per month to $2,712; that's $1,932 extra over a year. And if long term rates continue to rise to 4.5%, that would be an extra $327 per month compared to where rates were just prior to the election. That’s an additional $3,924 per year.

Historically, a 4.5% rate isn't all that bad. As rates climb, affordability will be squeezed and the Orange County housing market could move from a seller’s market to equilibrium, a market that does not favor sellers or buyers. The active inventory would climb, adding more competition for sellers and more choices for buyers.

It is important to note that nobody knows yet how the new presidential administration will truly unfold. It is mere speculation based upon gut feelings of what most likely will occur. However, Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors are all calling for mortgage rates to continue to rise over the next four quarters.

The chart below shows how far rates have fallen this year (on the left), and uses an average of the projections from the aforementioned institutions (on the right). As you can see, interest rates are projected to increase steadily over the course of the next 12 months.

 

One thing is for certain, the Orange County housing market will eventually evolve and higher interest rates will be the catalyst of that evolution. 

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago; a lower rate than your parents did twenty years ago and a better rate than your grandparents did forty years ago!

So contact me today for a free consultation to evaluate your ability to purchase your dream home!