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What are your thoughts on, what was already expected, the mortgage rate increase? I just read that it went up to around 4.125%. Do you think this may cause the home prices to go down, or will the home price will continue to increase as gargantuanly as it has in the past few months?
If it will take home prices down, how long do you think this sort of thing take? Weeks? Months? Years?
I realize this is close to impossible to predict, but I am intrigued as to what your impressions are.
Interest rates are going up, we finally have hope for a real economic recovery, one strong enough to over come higher interest rates. I think home price increases will moderate some in due time. But when rates first start up it moves some buyers off the fence so demand will remain very high pushing up prices for a year or so. Then once we see rates up near 5%, sales will slow and prices moderate. Not go down but slow their increase. Our job market remains strong in DFW so demand will stay strong unless rates go a lot higher (6 % plus).
This forecast can be wrong, forecasts are difficult , especially about the future as a baseball catcher once said.
Keep in mind back before the housing market crash around 2007 housing prices were at their peak and mortgage rates were around 6% I believe. Now there are some select areas in the country that are above peak, but a good chunk of the north east is still well below those values.
I think we'll see cheaper "first homes" impacted the most first. Families who are only putting down 3.5% where any monthly increase can be more difficult to swallow even if its only $50 because 36% of their income has to go toward housing. Families more in the middle/upper middle class might only put 20% of income toward housing so a $100-$150 swing due to interest isn't going to impact them that much plus its a tax write off.
The potential for it to impact housing is there, I'm just not sure how much going from 3.75% to 4.5% is going to throw off the housing market.
Raising interest rates will certainly impacts housing negatively compared to the boom years we've had. The question is will we get a soft or hard landing, and no one knows that. You may as well just throw a dart and go with that.
One thing to keep an eye out for is inflation. We need that number to pick up big time since interest rate will be going up now. If inflation continues to stall/fall and the rates keep going up, it can be real trouble. If inflation stalls, it will probably delay the Fed's rate increase, but the bond market could still push the rate up regardless of the Feds.
This is highly conjectural and hypothetical, but last weekend I noticed that a bunch of homes which I had been monitoring for months went under contract in basically a day. It looked to me like people were saying "Blast it! Let's buy a house before the mortgage rates go up too much!"
I mean, this could be quite the wild coincidence, but if it isn't, my hopes for higher mortgage rates bringing home prices down is not going to fly at all.
In fact everything I am reading points out to the home prices continuing going up and up and up, and that the mortgage rates won't do squat about it.
Seems mind boggling to me, but this is clearly a force to be reckoned with...
This is highly conjectural and hypothetical, but last weekend I noticed that a bunch of homes which I had been monitoring for months went under contract in basically a day. It looked to me like people were saying "Blast it! Let's buy a house before the mortgage rates go up too much!"
Absolutely, we saw not only a rush to buy, but a rush to refinance. And after that statement is where I start to depart from many of the statements on this thread. I think we will go through a phase with slightly elevated rates, and what I suspect a phase of increased growth, due to higher incomes. We may have stagnation getting there - rates stuck where they are, prices stalled where they are and incomes not yet adjusted. This will be a painful period. People will rant about Trump's plan not working. But most of us have been here before, in one way or another, but not with the planets lined up as they are currently. Reagan cut taxes dramatically, but inflation was crazy, interest rates were double digits. Or, the 1990s, the economic boom after the dot com bubble burst. Unemployment was high - around 7-8%. (I guess, there's a case to be made that is where we are now with the new calculations). But inflation was high, the Fed increased rates from 3% to 6%.
My point is, as much as anyone is certain as to what will happen, be ready for the opposite reaction. Economists are paid top dollar to predict outcomes and they are constantly surprised. There are a few principles that time has proven to be useful in the short term, but trying to sustain the pattern of controlled growth goes askew with world events. Examples would be, lower rates to induce economic growth, lower taxes to promote employment, raising rates to cool down the economy and so on. One of the catastrophic results of our low rates/low inflation has been our seniors have not had a decent raise in income in almost a decade.
You can second guess what's in store, but the bottomline never changes: buy what you can afford now (as long as it's somewhere you can be happy). If it doesn't pass that test, keep saving.
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