Buying selling, or renting, the Fed’s anticipated rise in interest rates is expected to impact all sorts of real estate trends. What’s that going to mean for your business?
- Stagnant home prices.
As interest rates go up alongside minor wage increases, the rising cost of credit could result in a surge of unaffordable markets and possible stagnation in home price appreciation as monthly mortgage costs put added strain on the pocketbooks of buyers. The toll? Housing price increases of 3% in 2016 versus the 6% national rise seen this year. How high will rates climb? A predicted 4.65% on 30 year rates, up 0.77% from the current rate, according to Realtor.com.
- Millennial interest will continue to increase.
Not a huge upsurge – merely incremental, as in recent years. Muddying the waters: Rising home prices and rents alongside the mixed millennial bag of saving for a nest egg at mom and dad’s whilst paying down student loan debt, working jobs with stagnant wages and waiting out boomers for promotions.
- Fewer houses for buyers.
The housing market’s recovery has been a double-edged sword for those looking to step-up, leaving entry-level houses hard to come by. If interest rates rise, the effect will worsen: People won’t want to trade-in a lower mortgage rate for a higher one, and may opt to re-invest equity into their existing homes. Compounding the issue: 15% – 7.9 million borrowers – whose home values are still underwater.
- New mortgage loan products.
Though mortgage originations are still expected to rise, a real need for new loan products is emerging – loans that don’t require large down payments or years of mortgage insurance premiums, and others that would allow for the extraction of equity from homes.