The Impact of Rising Interest Rates on Housing Demand

homebuyers

Since the beginning of the year, mortgage interest rates have risen over a half of a percentage point (from 3.95% to 4.52%), according to Freddie Mac. Even a small rise in interest rates can greatly impact a buyer’s monthly mortgage payment.

First American recently released the results of their quarterly Real Estate Sentiment Index (RESI), in which they surveyed title and real estate agents across the country about the impact of rising rates on first-time homebuyers.

Real estate professionals around the country have not noticed a slowdown in demand for housing among young buyers; nearly 93% of all first-time homebuyers last quarter were between the ages of 21-35, with the largest share of buyers (51%) coming from those ages 26-30.

First American’s Chief Economist Mark Fleming had this to say: “On a national level, mortgage rates would need to hit 5.6%, 1 percentage point above the current rate, before first-time homebuyers withdraw from the market.”

Yet in many areas, home sales have slowed down, which raises the question, what’s causing the slowing?

According to the last Existing Home Sales Report from the National Association of Realtors, sales are now down 3.0% year-over-year and have fallen for the last three months.

In Long Beach, the number of closed sales of single family homes in June was down 28.1% from the previous June, according to the Multiple Listing Service.

If rising interest rates aren’t to blame, then what is?

Fleming addressed the cause, saying that: The housing market is facing its greatest supply shortage in 60 years of record keeping, according to the Federal Reserve Bank of Kansas City. The ongoing housing supply shortage will make it difficult for first-time buyers to find a home to buy, even when they are financially ready.”

In short, a continued lack of inventory is slowing down sales.

First-time homebuyers know the importance of owning their own homes and a spike in interest rates is not going to keep them from buying this year! Their biggest challenge is finding a home to buy! For potential home sellers, the market continues to be a great opportunity.

 

About the Author

Shannon Jones has been selling real estate since 1998 and specializes in listing and marketing homes. She has consistently been one of the top Realtors in the Long Beach area. Prior to her award-winning career in real estate with the Shannon jones Team, Shannon has had successful careers in journalism and public relations. She holds a bachelors degree from UC Irvine and a masters degree from UC Berkeley. Shannon holds E-Pro, CDPE (Certified Distressed Property Expert), and PSC (Pre-Foreclosure Specialist) certifications. Shannon is very personable and maintains a very strong moral compass, always putting the best interest of home buyers/sellers above monetary goals. A California native, Shannon enjoys gardening, travel, reading, cooking and poker when she’s not selling homes MY DESIGNATIONS Lic# 01247705 | CDPE (Certified Distressed Property Expert) | E-Pro | PSC (Pre-Foreclosure Specialist) MY SERVICE AREAS Anaheim Bellflower Buena Park Carson Cerritos Cypress Downey Fountain Valley Garden Grove Huntington Beach La Palma Lakewood Long Beach Los Alamitos Los Angeles County Norwalk Orange County Rossmoor San Pedro Seal Beach Signal Hill South Bay Westminster

Leave a Reply

Your email address will not be published. Required fields are marked *