interesting post on rising rates from Scott at Boston.com
But before the chill sets in, sales could very well go into overdrive as buyers seek to lock in rock-bottom rates before they are gone.
Interest rates have just topped 4 percent. OK, that’s still incredibly low, but up sharply from 3.4 percent at the beginning of May.
If you doubt the power of the herd mentality to drive sales and prices in the real estate market, just recall what happened back during the nutty spring of 2010 as the expiration of the home buyer tax credit loomed.
Buyers bid up prices on homes in a scramble to grab the seemingly free government money before the offer expired, often negating the value of the $8,000 credit.
Could we see some panic buying over the summer if rates keep pushing up?
Don’t bet against it.
That said, in the longer term, higher rates could put a chill on sales, especially in high-priced markets like Greater Boston, or so says Lawrence Yun, chief economist for the National Association of Realtors.
OK, NAR is not exactly the first place I look for candid insight, but I thought Yun’s observations in this Forbes piece were worth looking at.
“In Middle America I don’t see much impact since homes are so affordable,” explains Yun. “The more expensive coastal regions is where one will begin to feel the first decline or impact.” He suspects that California metro areas and east coast hubs like Boston, New York, and Washington D.C. could begin to experience slackening sales because low-interest monthly mortgage payments in these relatively pricier places have helped make homes seem more affordable to more buyers despite the fact that relative to income, principal amounts are still expensive.
Are you ready to hit the panic button? Ready to buy now and ask questions later before rates go higher?