Where are interest rates really headed?

The past year has been a douzy for home buyers. There is one question I am continually asked by my buyers, sellers and investors: "What can we expect from interest rates in the next year? Should we wait?" While crystal balls remain elusive, I can only analyze the existing market landscape and use emerging trends to shed some light on the possible trajectory of interest rates. I wish SO badly I had the answer but in all honesty, no one does. My best advice? Look at the trends around you, look at your budget/finances and make the decision if you personally should buy a home with where rates are at right now.

In the mean time, here are a few factors to consider when it comes to evaluating interest rates and where they may be headed.

1. Economic Pulse and Central Bank Moves

The heartbeat of interest rate movements usually corresponds with economic indicators. GDP growth, inflation rates, and unemployment figures guide central banks' decisions. If our economy continues to recover and show signs of sustained growth, central banks might contemplate tightening monetary policy, which could lead to incremental interest rate increases.

2. Inflation's Shadow

Inflation plays a vital role in shaping interest rates. Should inflation remain on an upward trend, central banks might consider rate hikes to rein in excess spending. However, this dance between growth and inflation is delicate, as overly aggressive rate hikes could potentially stifle economic revival.

3. Market Sentiment and Global Winds

Beyond numbers and figures, market sentiment and global events cast their shadows over interest rates as well. Geopolitical tensions, investor perceptions of risk, and broader market trends can sway the course of rates. Amid uncertainty, investors often flock to "safer" assets like bonds, driving up their prices and possibly leading to higher interest rates. We've already seen this happen this year.

4. Housing Market Dynamics

Despite what you may hear from certain media outlets, we are currently in a very robust housing market might. There is a huge demand for inventory and more buyers that are willing and able than ever before. This increase in demand for loans may exert upward pressure on interest rates.

5. Government's Role

Government policies possess the power to influence interest rates. Policies impacting housing, finance, and broader economic goals can ripple through interest rate trends and inevitably change the real estate climate.

While we can't definitively predict the path that interest rates will tread in the next year, we can draw insights from the financial experts around us. I have trusted relationships with financial advisors and lenders who keep a very watchful eye on the markets. I am constantly checking in with them to see what information, if any, I can provide to my buyers.

More than ever, buyers should be asking themselves if they can financially handle a home purchase right now. If the answer is yes, you should absolutely do it. Homes are only going to get more expensive in the coming years.

When rates inevitably go downward, there is going to be a HUGE influx of buyers in the market, yet again driving prices upward.