As a member of Leading Real Estate Companies of the World, we are privy to global economic insights from LeadingRE’s Chief Economist, Marci Rossell, who takes complex economic issues and makes them relevant to buying and selling real estate. In this edition, we are covering Economic Growth and the Housing Market.

At the end of 2017, mortgage applications were down 7.5% compared to the same time in 2016. Hurricanes hitting Texas and Florida, two of the largest housing markets in the United States, along with high interest rates and the prospect of rising interest rates have had an effect.

CAUSE OF RISING INTEREST RATES: Interest rates are increasing because of strong economic growth.

  • Last quarter, the U.S. economy posted a 3.1% rate of economic growth.
  • The unemployment rate dropped to 4.2%.

LONG TERM EFFECTS: With the economy surprising to the upside, rising interest rates are not likely to have a harsh effect on housing market activity.

  • Mortgage rates will gradually increase at a predictable pace.
  • Wage rates will rise.

In conclusion, strong economic growth coupled with low unemployment rates and rising wages are the fundamental reasons behind the strength in today’s housing market.

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