It’s interesting to read what Fannie Mae has to say about mortgage rates. You may read about it here. “The question arises whether the recent increase in interest rates will stall the housing recovery, a relative bright spot in the economy during the first half of 2013.”
Rates on 30-year fixed mortgages are still 1% or more higher than they were as recently as June.
15-year fixed rates have gone up perhaps 50 basis points (0.5%), but overall there’s been a major bump in rates. My contention would be that a rise in rates will somewhat flatten out price increases over the next 6-9 months, but the lack of inventory is still driving buyers out, not to mention the spectre of even higher rates.
The NYTimes recently put out
which made every seller I’m representing call me- “Why hasn’t my apartment sold, over asking price?”
It’s a good primer for those just waking up from a 5-year nap. In some ways the rates may be speeding up sales.
The Real Deal touches on that here.
I know that at the very least, buyers are trying their best to time their “rate-lock,” when they commit to the rate they’ll use for their purchase. Of course, the conversation that our beloved Fannie Mae economist touches on above has to do with the appeal of short- versus longer-term mortgage products.
As rates rise, the concern is that too many people may opt for shorter term mortgage products (5- and 7-year) products, that will reset to very high rates when those terms expire.
In Manhattan, where buyers are putting 20-50%
and the average time in an apartment hovers around 5-7 years, this may simply be realistic, not to mention savvy.
Here’s an article that
touches on a small segment of these buyers- Baby-Boomers- who really should take shorter-term mortgages- but interest-only products?
Not sure about that.
Now this is a wonderful summary by Jonathan Miller, who argues pretty clearly that rate increases
do not immediately lead to price reductions.
More likely, rising rates will mean improving economics on a macro scale- which may mitigate price flattening.
Worth a read.
Perhaps what we’ll see, as we just passed
into the 3rd quarter-
is a dulling of the edge that buyers are feeling when they walk into open houses.
And frankly, that knife could be less sharp.
Read more here.