RISING INTEREST RATES? – Real Estate 2017
We are now in an environment where Rising Interest Rates are expected. There are many real estate pundits – both bulls and bears and as in any market, views on rising interest rates vary, but a consensus emerges and the truth is somewhere in the middle.
Today I want to share some perspective from Robert Shiller, who is probably the most well known and neither overly bullish or bearish. Additionally, further down the page, I have provided some historical information from Keeping Current Matters, on the history of interest rates and how the market typically performs.
I have been following Robert Shiller for many years now. He is very accurate with his real estate forecasts. In his view, things don’t look much different than they have and yes, we may have a Trump boom coming. No one should be alarmed. The housing market will not likely come to any kind of abrupt standstill or rise. After all, rates are only about where they began 2016 and all expectations at that time were that the housing market would be doing fine.
For more, please go to the link below. An audio interview with Robert Shiller Provides more information that will help you to understand the real estate market and where we are going. This is Great information for both home buyer and home seller information.
Home prices in 20 U.S. cities maintained a steady pace of increases in October while a gauge of nationwide property values rose by the most since mid-2014, according to S&P CoreLogic Case-Shiller data released Tuesday.
- All 20 cities in the index showed a year-over-year gain, led by a 10.7 percent advance in Seattle, and a 10.3 percent increase in Portland, Oregon.
- New York had the smallest 12-month advance, at 1.7 percent
- After seasonal adjustment, Atlanta, had the biggest month-over-month growth, at 1.4 percent, followed by Cleveland at 1.3 percent
- 20-city property values index rose 5.1 percent from October 2015 (forecast was 5 percent) after a 5 percent gain in the year through September
- National home-price gauge increased 5.6 percent from 12 months earlier, the biggest gain since July 2014, to a record 185.06; the measure first exceeded the 2006 pre-recession peak in September
- On a monthly basis, the seasonally adjusted 20-city index increased 0.6 percent (forecast was 0.5 percent) from prior month after a 0.5 percent gain
Lean housing inventory has continued to put upward pressure on home values at the same time steady hiring has lifted demand, resulting in two years of steady gains in property prices of around 5 percent. A post-election spike in borrowing costs could reduce housing affordability until home-price appreciation slows. The prospects of faster income growth in a tight job market may also make rising interest rates easier to manage.
“Home prices and the economy are both enjoying robust numbers,” David Blitzer, chairman of the S&P index committee, said in a statement. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to outpace gains in wages and personal income.
“Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30 percent since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends,” he said. “Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”
It also bears remembering that many long range forecasts thought that mortgage rates would be well above even these levels by this time. Existing homes sales volumes are strong, high, new home sales are strong, flipping houses is back in, condo living is a trend and we are not seeing much than maybe 1% increase in mortgage rates or less over the next year.
Historically, higher interest rates do not necessarily mean a fall in home prices.
Rising Interest Rates? Yes, but the article from KEEPING CURRENT MATTERS and chart below show that in the first phases of increasing mortgage rates, Prices and numbers of properties sold often RISE!
I think this is in part due to REPOSITIONING yourself in the market. For many it is the opportune time to upsize or downsize, or “RESIZING” to what will be appropriate over the next 10 to 15 years. Its also a great time to reposition any investment properties via a 1031 exchange, deferring capital gains and resetting your depreciation schedules, based on the higher sales prices. I can put you in touch with an exchanger, provide you with general guidelines about exchange rules and always talk with your CPA.
KEEPING PERSPECTIVE ON INTEREST RATES
Interest rates are still LOW!!
When you look at the history of interest rates over decades, they are still very low. The biggest reason interest rates go higher is to COOL inflation or slow rapid expansion.
Rising interest rates can be a sign that there is underlying growth in the economy or inflation. Inflation isn’t always bad, it’s been with us a long time. Remember, a loaf of bread was 29 cents, once upon a time. Real estate is a great hedge against inflation, better than cash by all measures, and an opportunity to leverage your investment dollars.
This is a lot of information for you. If you’d like to talk about real estate, trends and plans, I am happy to set aside some time to talk with you. You can contact me through my website here: https://principalpropertybrokers.com/gloria-matthews (Just mention the article in the notes box) or use the contact me box on this page: https://principalpropertybrokers.com/rising-interest-rates-real-estate-2017
Finally, I wanted to further emphasize, at Principal Property Brokers, we are not just “realtors”, we are your partners in real estate, always keeping in mind “The Principal is always You“. Let us all look forward to an exciting, productive and fruitful 2017.