How Will Increased Mortgage Rates Impact Towne Lake Real Estate

As you might have guessed, home affordability is tied most closely to interest rates and home prices. This month's article will help to quantify the impact our rising mortgage rates have on the cost of affordability and sales prices in Towne Lake.

While still considered low by historic comparison, interest rates have risen from 3.54 to 4.03 percent (a 13.8 percent increase) since the election, and home prices are up 4.1 percent over last year. This equates to a $142/month increase in the principal and interest portion of the payment on a $300,000 home bought in 2016 versus 2015.

What impact does an interest rate increase have on a potential buyer of your home? A buyer that was qualified to borrow $300,000 for your home in early November now only qualifies for $280,000. When
borrowers start to qualify for lower amounts, we start to see a leveling off of price appreciation in the higher priced homes. If rates continue upward, that stagnation of home sales and leveling of price appreciation will push the available buyers into lower and lower priced homes. It would follow that sellers priced in the top
of the market would need to be more price competitive and this would eventually cause a dip in sales prices.

We hope the recent increase in mortgage rates is an anomaly but with unemployment at it's lowest level since 2007 and the stock market thriving, it is expected that the fed will start to push rates higher. If you are needing to sell a home priced over $300,000 we would suggest not delaying. It's impossible to predict the top of the market but our market NOW makes us think of one of Warren Buffett's best known quotes; "Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

We have been in an intense seller's market for almost six years. This is very good for sellers, but it can't last in the face of rising interest rates. Call your Realtor today for a comparative market analysis of your home’s value.