One puzzle for homeowners deciding whether now is the time to put their homes up for sale is whether rising mortgage rates will measurably slow the response. It’s far from certain that home loan rates will continue to rise as we go forward—but it’s likely enough. The picture becomes even less predictable if you add in the notion that it’s far from certain that higher borrowing rates will necessarily dampen buyer activity.
The reason for the hemming and hawing on this point was laid out by realtor.com’s Sharon Lurye earlier this month. She points out that this has already been a “paradigm-breaking” real estate market—one with the promise of more common-sense-busting developments to come.
Granted, it’s a given that today’s higher mortgage rates make homebuying more expensive “for many, as their monthly mortgage payments get bigger.” That dictates that fewer buyers will be inclined (or even able) to enter the market. Fewer buyers lessen demand—definitely not good for “suppliers”—the homeowners who might or might not list their properties.
How could such circumstances even possibly encourage sellers? Among factors increasing the likelihood of brisk sales is that builders have been unable to ramp up production for a number of reasons, creating what Lurye calls a “dire” housing shortage. Too, there’s what is actually taking place in the markets all over the country. One California mortgage company owner says, “With how hot the market is, the rising rates will only slightly affect housing prices.”
And then, there’s this: in the wider financial view, those rising rates— “even in the 3% range”—are very low. Tellingly, to date, the rate increases have not even kept pace with the current rate of inflation. “That means that banks aren’t even charging enough in interest to make up for the value that money loses over time.”