“If the 30-year, fixed-rate mortgage rate increases to 5%, which most economists agree is likely by the end of 2018 or early 2019, the impact on the market potential would be a modest decline to 6.10 million existing-home sales, according to the model,” wrote Mark Fleming, chief economist at First American Financial Corporation, the provider of title insurance and settlement services for the real estate market.
He noted that mortgage rates are rising because of positive economic conditions, which means household incomes are also rising, which should offset any increases in borrowing costs. “The housing market is flexible and can adjust to moderately higher mortgage rates without significant impact. The likely rise in mortgage rates is not the worry for first-time home buyers, but whether they can find something to buy in today’s supply-constrained market,” said Fleming.
Ivy Zelman on mortgage rates: ‘If rates rise, that eats into affordability’, and 5.5% on a 30-year fixed-rate mortgage would really start to concern her.
Ivy on home builders: Slightly slower spring season than normal. She says that 59% of builders are seeing price resistance from buyers.
An agent who has been in the business for three years is sitting on a listing in original condition priced over a million dollars for more than 100 days. He told me he didn’t know what to do to get it sold.
Another agent who has been in the business for seven years told me that she had a $1,000,000 listing sell right away, but can’t get anyone to show her two listings in the $500,000s. She has been averaging two sales per month, but has never seen these market conditions and didn’t know what to do. She is contemplating a new job outside of real estate.
Kayla makes a cash offer that is a little under the bottom of the list-price range on a house that’s been on the market since March. The sellers counter-offer full price (the high-end of the range), 30-day escrow after we already told the agent that we needed 40 days, sellers to rent back for 30 days for a monthly rental rate that is $500 under market, five days to remove contingencies, and washer/dryer not included but might be negotiable. The listing agent noted that she had a comp.
Buyer passed on it.
It’s nice to read about market observation. Thanks
Good information. Looks like some sellers have reached the denial phase in the cycle.
Ummm. Anybody been watching Netflix stock lately? Some other stocks are doing the same. People are making bank that has not much to do with average income ratings. Their wealth is on paper, and waiting. Those most likely to spend over a mill for a house, are also more likely to have some stock in their investment portfolio, that they can cash out in emergencies, like “overpaying” for a house, by my reckoning.
In other related news, while I think drawing a parellel to our lord and savior and our current President could be qualified as “a bit much,” the fact remains that there are a record number of folks who were at once qualifibly lame, who can now hoist a barge, if not lift a bale.
Leaving out a traditional religious undertow, I nevertheless find it difficult to rationall dispense with the conceit that Magic is a somewhat reliable co-efficient in rating our economy, as long as he holds office, and a rational argument could be made for bald-faced Wizardry, looking ahead:
Looks like some sellers have reached the denial phase in the cycle.
Yes and there appears to be little fear that they may have missed their opportunity. Locally we are 9+ years into a real estate bull market, yet sellers and agents think it will go on forever.
Interesting tidbit that I looked up today regarding the article on which towns have the highest YoY increases in their median list prices in March. Fifteen towns have double-digit increases:
Carlsbad, which should be the highest YoY change due to it being the most reasonably-priced of our La Jolla-to-Carlsbad target market, had only a 2% increase YoY. Yet you see sellers and their agents regularly pricing new listings wildly higher than last year.
Welcome Michael and Steve!
Last year we had multiple offers on flips the first weekend. This year its been 1 offer after a week on the market. We work in the sub 700k market.
Thanks for the insight Tom!
I agree – the first week on the market has been remarkably less productive this year, which is surprising.
Game over? I just listed my condo in Seattle and got 1 offer in 7 days…..
In Seattle, the hottest market in the world outside of Silicon Valley.
So, umm, yeah.
Let’s see how long it takes sellers to figure it out.
Most will try again at least one more time (2019) before thinking of maybe coming around to considering something close to a price reduction.