If Mortgage Rates went up….
If mortgage rates went up, the dollar would be worth more. Money would be more expensive to borrow, therefore more scarce and valuable. You would have more purchasing power with the money you already have and earn a higher return on savings. Banks would have more money to lend, because they could entice customers with high CD, IRA and savings rates. The higher rates would curb inflation, causing the price of everything to go down, including real estate.
Higher mortgage rates will further depreciate America’s housing market. If you are selling a home for $100k and the average mortgage rate is 5%, the buyer’s payment on a 30 year fixed mortgage is $536 per month. If the mortgage rate went up to 8%, how much of an offer could the buyer make and still keep their monthly payment at $536?
Answer: $73k. Buyers in the market for your property can now only offer 73% of the price when rates were 3% lower. Your home just depreciated 27%.
Are we at the bottom? Not even close.
On April 1st Federal Reserve is not continuing its investment, which means that mortgage rates are about to increase. Experts believe home prices will drop 5 to 10 percent. – realestate.com
Rates have been kept artificially low for the past 9 years, creating a boom and then propping up a bust.
Perhaps rates should really be at 15-20% to make up for all the money that has been printed and spent.
Either rates will stay low and the whole thing will go into a death spiral or at some point market forces will push rates up. When that happens, expect your home to be worth less, and maybe the market bottom will be in sight.
For professional property management in Lakewood Ranch, FL, contact Sun Rock Property Management
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