Dennis Lynch of Rumson, NJ, Explains What the Fed Interest Rate Hike Means for Homebuyers

Based in beautiful Rumson, New Jersey, Dennis Lynch is a seasoned real estate analyst with many years of experience under his belt. Together with his son Marshall Lynch, he helps people across New Jersey navigate notoriously tricky real estate markets – helping them better understand when to buy, when to sell and when to wait until the perfect opportunity comes along.

Over the last decade alone, Dennis Lynch has proudly served clients in Rumson, New Jersey, so it's safe to say that he's seen quite a bit during his career. While the real estate market is nothing if not cyclical, Lynch notes that sometimes unexpected circumstances can occur, as is the case with everything going on in the market (and indeed, the world) right now since the onset of the COVID-19 pandemic.

After a period of historically low-interest rates that boosted real estate markets everywhere and that created a surge of demand without necessarily the supply to meet it, things appear to be taking a turn. Now, people are dealing with record high inflation rates – to the point that these are numbers that haven't been seen in almost four decades.

The most recent example of this comes by way of yet another interest rate hike by the Federal Reserve in September 2022. But what does such an interest rate hike mean, and, more importantly, what will the impact be on homebuyers in and around the Rumson, New Jersey, area? Dennis Lynch has more than a few thoughts on that, which he hopes will set the record straight for people everywhere.

The Situation With the Federal Reserve and Interest Rates

For those who haven't been paying close attention to the news (or for those who are overwhelmed by the sheer volume of breaking news happening in the last few months), the Federal Reserve approved a 75-basis-point interest rate hike in September. This is the third in a row in what is seen by financial experts as an aggressive move to fight inflation.

Because of this, the central bank's new benchmark lending rate will be between 3% and 3.25%. To put that into perspective, that is the highest it has been since 2008, which is when the global financial crisis began to take hold.

While an interest rate hike in certain circumstances is not necessarily unusual, the Federal Reserve has not increased rates this high for three consecutive periods before. All of this is due to rising inflation. The move is seen as the most aggressive since the 1980s.

Whenever the Federal Reserve increases interest rates like this, it is to slow the rate of inflation. Inflation can certainly cause economic hardship for many as it increases the prices of things like gas, groceries, and other essential items for a while. An increased interest rate, on the other hand, increases the costs that consumers have to contend with when they borrow. So that means that things like mortgages, car loans, and even credit card rates are about to increase if they have not already done so.

One of the issues with the entire economic situation right now has to do with a fair amount of uncertainty that is present. While inflation was a serious issue at the beginning of the year, things seemed to get better during the summer. Then, when the economic report came out and interest rates were far higher than expected, it sent the stock market into a tumble. This recent interest rate hike is a direct result of that, among other things.

Uncertainty also means that nobody is quite sure how this will all play out in the long run, regardless of how educated someone's guess might be. This process is very fluid, and, depending on how things go, it could lead to another recession. If it does, however, nobody knows how hard that recession would hit the economy.

All this is making it difficult to make important financial decisions, at least in the short term.

What the Real Estate Market Looks Like Moving Forward

While Dennis Lynch has been following this situation very closely, the one area that he is most concerned about is the one that impacts him and his fellow Rumson community members most directly: the impact on the real estate market moving forward.

Nobody can argue with the fact that the housing market in the United States boomed during the pandemic. People who were stuck in apartments or smaller homes suddenly needed larger spaces to not just live, but also to work. This, coupled with record low-interest rates, led to a period of activity that hadn't been seen in years.

Thanks to the recent series of interest rate hikes, however, the market in Rumson and many other areas have already begun to slow. This is because mortgage rates are on the rise. According to one report, at the beginning of 2022, the average rate for a 30-year fixed mortgage was 3%. By September, that number had doubled to 6% with no real end in sight.

To put that into perspective, the same research indicated that if you buy a $400,000 home in September, the mortgage payment will be $700 more expensive per month than it would have been had you purchased the same home in January.

When you consider that these types of mortgages are the most popular in the country, accounting for more than 90% of all mortgages, it's easy to see this particular ripple effect begin to take shape.

In the short term, this means that the cost to purchase a home is on the rise, leading some buyers to feel as if they've already missed their window. This, coupled with a supply that is still low (meaning buyers have less urgency to jump at a house than they would have a year ago), is leading to houses sitting on the market for far longer than they have.

In essence, fewer people are buying houses right now because it's more expensive to do so, and those who have decided to take the plunge have fewer options to choose from. At the very least, this is the situation as it currently stands. Whether or not this is a minor blip in a hot market or something more permanent will ultimately depend on whether or not the Federal Reserve's interest rate hike has the impact on curbing inflation that many hope it will.

In the end, Dennis Lynch and his son Marshall bring decades of combined experience to the Rumson, New Jersey, real estate market, something that shows no signs of slowing down any time soon. Together, they pride themselves on their ability to bring a fresh and innovative approach to a real estate landscape that is always changing. The current situation with the Federal Reserve and interest rates is proof positive of that.

Still, while this is a difficult situation when compared to what has been happening in recent memory, it certainly isn't unprecedented. With the right guidance and access to the best expertise, people in and around Rumson will still be able to accomplish all of their real estate goals – and Dennis Lynch is certainly out to prove it.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.