3 Reasons Not To Panic Over The Year’s 3rd Rate Rise

The real estate news is fresh - as is the immediate response. Rates have risen for the 3^rd time this year: OUCH. With media headlines touting that this is the end of the ‘easy money era’ and home sales struggling last month, fears are abound and we are here to say we get it. The market is changing – but change is not always a bad thing. Market moderation is a tale as old as time… and just as in any life transition there are pros and cons to a time when things are not how they used to be.

Will it cost more to borrow money? Yes. Will some buyers be harmed by reduced qualifying amounts? Yes. Will strategies need to adjust and change? Yes. Is every real estate opportunity over? No.

But you don’t have to take our word for it. Here are 3 reasons why there is no place for panic in today’s market:

#1: Economic fundamentals are strong. According to Freddie Mac’s Chief Economist Sam Khatar: “Consumer confidence is at an 18-year high, and job gains are holding steady. These two factors should keep demand up in coming months.” In addition, NAR® Chief Economist Lawrence Yun cites that “job creation means second or third incomes being added to households which gives consumers the financial confidence to go out and make a home purchase.” Not all buyers will be hindered by rising rates, and those impacted may still have options by adjusting some expectations.

#2: Inventory is a prime factor for the ‘slow down.’ Yun has stated that low inventory is the biggest contributor to the struggling homes sales figures. We are not looking at a situation where large job losses and overall poor economic fundamentals are resulting in decreased home sales. It’s simply that the market (still) lacks sellers. In fact, numerous analysts have reported that many homeowners waited to put their homes on the market since prices were still rising and they wanted to acquire maximum equity. Yun believes that the more prices are moderating, the more willing sellers are to list their homes. In fact, the Q3 Housing Opportunities and Market Experience (HOME) survey revealed that 77% of consumers think now is a good time to sell compared to 55% 2 years ago.

#3: The affordability game has room to grow. It’s no secret that the lack of inventory has driven bidding wars and rising home prices have followed. National price gain decelerations are urging more sellers off the fence, increasing inventory and accordingly decreasing bidding wars. Yun explains that “potential sellers are considering that now is a good time to list and bring more properties to the market.” More inventory means fewer bidding wars and more wins. Plus, sellers who are moving up aren’t facing such drastic price gains at their next price point. Bob Broeksmit, Mortgage Banker Association's President/Chief Executive, agrees that "as the rate of home price growth slows and comes more in line with the pace of wage growth, we anticipate a further pickup in purchase activity.”

If there was a magic wand that created the perfect home at the perfect price point for every buyer – we would have fewer gray hairs! But what the market lacks in fantasy – we can compensate for with strategy. Please don’t hesitate to reach out for a no-obligation consultation on what this changing market means for you.

All our best,

Mark & Jason

Resources Used:

Mortgage Rates Hit a Seven-and-a-Half-Year High as the Easy Money Era Comes to a Close

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