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Short, Intermediate, And Longer – Term Impacts On Home Sales, When Rates Rise!
For many reasons, some economic, others pandemic-related, so-called, fatigue, etc., housing prices, in most areas, have risen to record levels, or, near! Because of prolonged artificially-created, low-interest rates, mortgages are at historic lows! Because, for most home buyers, financing must be used to afford the purchase, when lower rates mean cheaper money, and thus, more home affordability – for – the money, prices often go up! This allows qualified buyers to qualify for more money/loans, as the monthly mortgage and gross income ratio is artificially reduced! How long will the trend continue, will it become a new – normal, will previous trends/cycles return and how will price be affected in the immediate, medium and longer term – these are all factors to consider! With this in mind, this article will briefly consider, examine, review and discuss, consider and understand some of the possibilities.
1. Short term: With the Federal Reserve Bank announcing that it plans to raise rates three times in 2022 (of course, this is before the omicron type of potential ramifications and consequences), many feel pressured to act quickly, to take advantage. Today’s low rates, before they go up! The three increases would probably translate into, at least, a 0.75% higher rate, which for most mortgages, would translate into hundreds of extra dollars per month. A few things to consider and pay attention to, this rate of house price growth will most likely not continue, especially at such a high rate! How long one expects to keep a particular house is a point to consider carefully and wisely before moving forward!
2. Intermediate – Term: Although, many believe that – knowing, the exact timing of any predicted rate – increase, is uncertain! Fed has changed, and/or, its strategy and approach have changed, in the past, due to potential inflationary pressures, how long economic conditions will last and unknown factors related to the pandemic, etc. With this, what the middle-term can bring. , on a large scale, this stage, what can bring! Apart from this, buyers’ attitude, perception and their confidence etc. greatly affect this real estate market!
3. Long term: Will the longer-run, things, restore, that we have seen in the past, alternating cycles between sellers, buyers and neutral markets? Possibilities include: a continued large increase; More – slowly, but constantly – one; some leveling; And/or, we’re going to see some sort of falling prices, for a while, at least in some areas.
Since no one has a crystal ball, it is wise to fully know and understand the possibilities, implications and consequences! Will you learn as much as you can, so that you are wise and well prepared?
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