Interest Rates are on the rise. How will this affect the housing demand?
Research shows that Americans are confident in the economy. In fact, a recent Gallup poll states that Americans view the economy more positively since the election in November than they did in the previous nine years.
The housing market has remained steady, since last spring. We did not see home sales dip in November, December or January. Normally, spring is thought to be the optimal time to sell, however; demand for housing did remain high over the winter.
Jonathan Smoke, the chief economist at realtor.com, stated in his latest article that “In most markets most years, the optimal time to list is in the spring so that the maximum number of potential buyers view the home. This year, the conventional wisdom of buying and selling may need to change. Inventory levels at the beginning of 2017 are at multi-year lows. Sellers now face very little competition.”
As I am sure you know, Interest rates on the rise.
In a recent survey of loan officers that asked them how they thought rising rates will impact demand for mortgages, 16.7% said it would have no impact because there is not enough supply to fulfill current demand. Another 16.7% said rising rates will weaken demand. I agree with that assertion. The vast majority of people moving on—they’re just going to have to pay more.
If you’re a first-time buyer or a seller who’s thinking about buying, you have to take into consideration that if you wait until later in the year, you will have to spend more money. All experts are projecting that interest rates will continue to rise throughout the year.
The average interest rates are going to rise about a tenth of percent each quarter. So why wait?
I have had clients reach out to me and ask if interest rates go up, will my home value decrease?
In this economy, that does not appear to be the case. The fact remains that there is low inventory out there and that drives the demand up.
CoreLogic Chief Economist Frank Nothaft said, “Very low mortgage rates sparked demand, and with inventories low, the result has been a pickup in home-price growth.”
If you have any questions about our market or are thinking about buying or selling a home, please don’t hesitate to reach out to us. In the meantime, be on the lookout for my next market update.
Carol Swain. A senior real estate specialist with 25+ years of experience in the real estate industry.