If higher rates cause buyers to be more discriminating, wouldn’t prices drop to compensate? Not necessarily.
It will mean fewer sales first.
The wealthy are doing just fine, and a little blip or two in rates or prices won’t deter them from buying the top-quality properties. It’s the inferior properties that get punished when the market goes soft.
It’s the perfect storm for a slowdown in sales:
Buying season is over.
Higher prices and rates.
Over-zealous sellers aren’t satisfied with a home run, they are going for the grand slam, price-wise.
While it seems likely that sales counts will slow the rest of the year, it hasn’t happened yet.
Incredibly, the NSDCC closed sales for August 1-15 are 33% higher this year than in 2012 (154 vs 116), and late-reporters will add to that total.
Those sales had to be helped by the rate-spike in late June as buyers rushed to lock and close. But it can’t continue, can it?
Rich people will still be buying the top-quality properties. But if buyers get more discerning, more properties would be deemed inferior, and slow sales.
Sellers are notorious for responding very slowly, and after the run we have had for the last 12 months, they aren’t going to believe that they missed out….again. Lowering their price would cure the problem, but most sellers would rather pack it in for the year, and be more determined to make a killing next spring when the market “picks up”.
A market slowdown is predicated on buyers being willing to forego an inferior property now, and wait longer for house-perfect.
Rates are rising – they won’t mind waiting longer, right?