So, about a year ago, rates were running around 3.5%. No more, my friends, I’m sad to say. They have risen dramatically since then and people are wondering what the prediction is for the immediate future and how that affects the housing market. Will we see more inventory? Less? While no one has a crystal ball, based on historical trends, here’s what I think we will see: with rates currently at 4.875%, fewer first time buyers will be able to afford the payments and will be hesitant to purchase. I also think we will see fewer move up buyers moving up. Even with some equity in their homes, if, for example, their current mortgage is rate is 3.5%. they may not be ready to increase their monthly payment to what it would be in order for the move to be enough of a step up to make it worthwhile. Don’t panic though, if you’re considering buying a home with a conventional 30 year mortgage as it looks like shorter-term loan rates will be the ones most affected.
One potential advantage to eliminating some buyers from the buying pool is that, with fewer of them out there, sellers may need to lower their prices–consider the basic rules of supply and demand. At least here on the Main Line, we have been suffering with very low inventory the last few years. It’s possible that with less competition, buyers will have a bit more choice and we won’t see as many over-asking bidding wars. No one can predict with much accuracy what will happen, but to read what some people expect, click here.