Home buyers are hoping that higher rates will cause prices to come down, and while it could certainly happen – here are reasons why they won’t:

  • Prices have increased so much, so fast, that sellers are emboldened.  If it would have taken the 5-10 years to bottom out like many predicted, there would be more seller fatigue.  But today’s disappointed sellers will be more likely to think that the next rise in prices in right around the corner – and they will wait, rather than dump.
  • Rents are rising; which puts pressure on buyers to buy and sellers to stay.
  • Loan mods are working.  They might be temporary, and there are probably a number of defaulters getting a free ride, but with higher prices, those psuedo-homeowners will do whatever it takes to hold out longer to see if they can cash in…again.
  • The media keeps saying that it is still cheap, historically.
  • Lenders keep getting more creative. The mortgage industry is known for its hybrids – you hear them pushing more of the 5, 7, & 10-year adjustable loans now, and the piggybacks (where the buyer gets a 1st and 2nd mortgage to lower the down payment required) are back!
  • REOs and short sales are over, and nobody is going to ‘give it away’ now.
  • How homes are sold is changing.  You saw on video where Spencer said that his Zillow is already the national MLS, and other players have to be licking their chops when they see the buffoons at NAR stumbling all over themselves.  Google could be a game-changer too – click HERE to see their patent for ‘software applications for real estate multiple listing services’. The excitement will help to propel sales.
  • Inventories may be up, but you don’t see many quality buys.

All factions are lined up in support of housing, and today’s buyers are comfortable with looking long-term.

The higher prices/rates are reasoned away by the pull of the ultimate goal – owning a home in which to raise the family.  The most-motivated buyers are the ones buying, and with prices only going up at 1% at a time, a few more bucks won’t slow them down.

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Jim the Realtor
Jim is a long-time local realtor who comments daily here on his blog, bubbleinfo.com which began in September, 2005. Stick around!

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