As 2016 draws to a close, many people are wondering how mortgage interest rates will change in the New Year and how the housing market will perform if rates do rise. Despite the fact that interest rates have not trended up since December 2015, experts are suggesting that rates have begun to rise and they will continue to go up over the course of 2017.
According to a CBS News article, these rate increases do not pose a threat to the real estate market and they anticipate that house prices will continue to rise.
“But that small initial increase, which would be the first upward tilt in rates since December of 2015, is unlikely to reduce demand for housing. Home prices have continued to rebound this year. The Federal Housing Finance Agency (FHFA) House Price Index posted a 6 percent gain in the third quarter on a year-over-year basis.
Economist Andres Carbacho-Burgos of Moody’s Analytics expects nationwide housing prices as measured by that index to rise an average of 4 percent in 2017. Steve Hovland of online real estate management firm HomeUnion projects a similar uptick, while noting that some markets that have seen have seen the sharpest price increases during the recovery, such as New York, Los Angeles and Austin, Texas, could see a dip.”
According to the same article the biggest risk is to luxury homes. In many areas the mid level priced homes are seeing multiple offers while the luxury homes are having trouble attracting any buyers. This goes along with the fact that the average amount buyers are borrowing is very modest compared to where it was during the housing crash. This shows us that people are buying within their means and sticking to the mid-level priced homes. This is a trend that is not likely to change.
With the emphasis on these median priced homes the big issue to come about in the 2017 real estate market will likely be an inventory issue. There are fewer homes in this price range and with the bulk of buyers shopping in the same range this can cause the market to move quickly and you may see an increase in multiple offer situations.
Trends show that borrowers are coming to the table with bigger down payments then they have in the past which also helps to keep housing debt low.
What does this mean for you?
If you have been considering buying or selling your home in the next few months you should rest easy that the market will do fine despite a series of interest rate increases. The increases are only expected to increase the average monthly mortgage payment by $65.
If you are a homeowner who intends to stay in your home but wants to refinance, now is the time. Rates may never be this low again and talks of increases should be taken seriously.