What will a new administration, rising interest rates do the real estate market?

A new administration, rising interest rates… what will it do the real estate market, your home’s value, and your plans? As we enter 2017, the one certainty is that there will be a great deal of change as the President-elect challenges the status quo.

Rising Interest Rates
The Federal Reserve continues to signal that rates will rise in 2017. Rising interest rates aren’t necessarily negative -it’s a positive sign of a stronger economy. In fact, it may trigger more home buying, as first time buyers decide to act sooner once they see how rate increases will lower their affordability levels.
On the other hand, potential move-up buyers are locked in at historically low rates. They may be unwilling to take on a mortgage for a new home at a higher rate, which will slow existing home inventory levels.
Fears of rising interest rates will have little impact on the market as long as they are kept to a certain level, which the Federal Reserve is proposing at this point. Anything over 6 percent is likely to cause a real slowdown in the market.

First Time Home Buyers
Taking that into consideration, fear of interest rates increasing should drive at least the first half of the year in sales activity, as first time buyers jump into the market, but after that, we may face a period of sellers needing to accept price adjustments due to buyer hesitancy.
First-time buyers are important to the overall health of the market, but they’re not all that drive it. Movement in rates occurs in conjunction with other economic factors, such as whether income levels throughout the country are growing or not, whether credit restrictions are loosening.

It's the Economy
Independant of the election outcome, the economy was already showing signs of strength, suggesting 2017 will be a good year for the U.S. economy. Still, the uncertainty people are feeling could have an impact. There is concern about what higher uncertainty and volatility does for consumer and business confidence. A combination of high interest rates and low inventory would not be welcome. Affordability remains a concern.
Erratic federal monetary, housing policy or loose lending would be worrying too. As rates rise, ‘unusual’ loan programs become available, and you remember what happened last time these hybrid loans became available. Have we learned anything? Don’t bet on it.

Then there are elements out of our control — global market incidents or terrorist attacks. 2017 will be an unorthodox, non-traditional and unpredictable year both nationally and globally. This may well be the last boom year of the recovery. It’s quite possible 2018 will be slower and the election honeymoon may be over.

What you can do to do to be ready:
· Beware of ‘new’ or hybrid mortgage loan products both for first time buyers and in refinancing.
· If you are a first time buyer, pull the trigger and get into the market now.
· Thinking of moving to a larger home? Consider doing it now rather than later.
· If you have a 1+ year timeline before a move, start preparing your home to get it into top condition now; you may well find it’s going to be tougher to sell at that time.
-Dicky and Chris
TowsonNeighborhoods.com

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