What do Rising Rates mean for the Housing Market? Buy or Sell right now?

-Researched and written by Mike Zschunke, Broker/Agent/Advisor, Berkshire Hathaway  HomeServices Arizona / Shift1 Properties

Almost every day I am asked “How’s the Market?” and my reply is usually that it depends if you are on the Buy side or Sell side. However, we are in a unique situation now with today’s economy. It really is a good time to buy, as well as a good time to sell depending on your individual wants and needs.

Most people have heard the headlines saying that “…rates are rising and the market is slowing.” While that may be true for some markets, it is not true for every market as ALL Real Estate is local. We happen to be in Scottsdale, Arizona which happens to be one of the hottest markets in the country right now. The Metro Phoenix area welcomes over 200 new residents per day and Housing Inventory is currently about 50% of Historical Norms. It is this Supply / Demand relationship that supports the record high prices we are seeing right now in the Phoenix housing markets.

So why would anyone want to Buy a house now? Because everyone Needs a place to live. You can either rent and pay someone else’s mortgage or you can buy and pay yourself. If you buy a home, you lock in the largest portion of your housing costs thus limiting the impact of any future rental rate increases.

Yes, Mortgage Rates have risen to 2008 levels but the average rate on the 30 Fixed Rate Mortgage is 7.77% over the last 40 years. As mortgage rates rise your monthly home Purchasing Power greatly diminishes.

Many of the “experts” say that rates will subside but the Federal Reserve still has $2.7 Trillion in Mortgage Backed Securities to unload from its Balance Sheet. Flooding the MBS market with these low yielding securities will likely push rates even higher. These higher rates in conjunction with high housing prices creates an affordability problem but the lack of Supply will keep the prices firm and only the well qualified buyers will be able to purchase homes. If you can get in Now, you have a much better chance of locking in your housing costs.

So why would anyone Sell a house now? For most homeowners that are in a 3% fixed rate mortgage and comfortable where they are, it makes economic sense to stay put. However, in tourist areas such as Arizona, especially in Scottsdale, many of the homes are Second homes, or Vacation homes handed down through families and often do not have any sort of liens or mortgages on them. Home prices are at all time highs. and it might make sense to cash out or downsize to shore up your financial picture heading into a recession or period of economic slowdown.

Every Buyer and Seller has their own unique wants and needs and every local area has its own unique real estate market so you really have to sit down with a professional and discuss what works best for you and your financial goals.      -Mike Zschunke