Historically low interest rates have finally begun to rise in recent months, and they are expected to continue this climb. How will this affect your real estate selling endeavors in 2017?
Housing and economy experts concur rates are not likely to go back down. Uber-low rates are in the rear view, with 30-year fixed-rates expected to stay in the 4-5% range by year’s end. A rise to 4.5% is expected, with the worst-case scenario knocking at the door of 5%. This is expected to reduce home sales over the course of the year by about 200,000 homes.
As rates climb, buyers may feel pressure to act. At a certain point, their home ownership dream will be stretched to the breaking point, but we aren’t there yet. At today’s rental rates, mortgage rates would have to be in the 7-10% range to equate rental costs.
Cooling “hot” markets
In expensive markets (LA, NYC, Miami) interest rates will push out buyers already struggling to afford homes, even with historically low rates.
Real estate selling may also be stymied, as sellers will effectively be “rate locked” into homes with no incentive to move, slowing the existing-home market and leaving homeowners to renovate existing spaces over higher interest rate new home loans.
Also playing a role: Income levels, which could stave off a decline so long as stronger economic development continues. The Fed raising short-term rates is also up in the air, as Trump’s inauguration, political appointments, and policy changes take their toll. The Fed raising rates won’t necessarily translate into higher mortgages for buyers – but it will add pressure, especially if they start raising rates aggressively and into early next year. Expect volatility in the next few months as the new President settles in.
How will the economic and political climate effect real estate selling in 2017? Properties Online has the forecast for success.