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 the Impact of Rising Mortgage Rates on the Housing Market.
Mortgage rates are at their highest level since April 2011. In 2017, the 30-year fixed mortgage rate was at 4% and ended the year at 4.1%. Since the beginning of 2018, mortgage rates have steadily climbed upward due to the Federal Reserve tightening monetary policy. The 30-year fixed mortgage rate was at 4.4% in early March.
REASONS BEHIND HOUSING MARKET ACTIVITY
While refinance activity has been affected by the rising mortgage rates, mortgage originations are 3% higher than they were at this time in 2017. This speaks to the fundamental strength of the housing market. These are some of the reasons:
• Buyers are rushing to purchase in anticipation of higher interest rates.
• Housing markets are being sustained by strong fundamentals.
• Strongest labor market in decades.
• High stock market gains in 2017.
• Long-term demographic trend of millennials making first-time home purchases.
Over the course of 2018, interest rates and mortgage rates are expected to continue to rise. However, homebuyers are no longer responding to short-term interest rate movements, and the effect on the housing market won’t be the same that it would have been a decade ago.
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