Although interest rates are rising, there is no evidence that housing prices will slow down in the near future.
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As you might be aware by now, mortgage rates are increasing in 2017 compared to 2016. Many of our clients have been asking us how these increases will affect the real estate market, so today I’m going to answer that question for you.
Most experts forecast prices to appreciate in the 4.5% to 5% range throughout this year. However, this increase isn’t expected to slow the housing market down. Here’s what FHFA Deputy Chief Economist Andrew Leventis has to say about it:
“Although interest rates rose sharply during the fourth quarter, our data shows no signs of a home price slowdown. Although it will certainly take more time for the full effects for the elevated interest rates to be felt, there is no evidence of a normalization in the unusually low inventories of homes available for sale, which has been the primary force behind the extraordinary price gains.”
In other words, there is no evidence that rising interest rates are slowing down pricing. What’s currently determining pricing is supply and demand.
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Rising interest rates aren’t expected to slow our housing market down.
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Fannie Mae, the National Association of Realtors, and the Mortgage Bankers Association all project another 0.5% increase in mortgage rates from now until the first quarter of 2018, which would put the average at 4.63%. From a historical perspective, those are still incredibly attractive mortgage rates.
According to a recent survey by Pulsenomics in which they asked experts what level they thought the 30-year fixed rate mortgage rate would have to rise to slow home value appreciation, most of them answered 5% and above. We probably won’t hit that mark until the fourth quarter of 2018.
In the meantime, prices and interest rates will both continue to rise. Whether you’re a buyer or a seller looking to move up to a bigger home, I would suggest taking action now.
If you have any questions or you’re thinking about making a move in our market, please give us a call or shoot us an email. We’d be glad to help you.
