Poll: Will Rising Rates Delay Your Housing Search?

• July 1, 2013
• 7 Comments

by UrbanTurf Staff

Last week, long-term interest rates spiked, rising to their highest rate in 18 months. On Thursday morning, Freddie Mac reported 4.46 percent with an average 0.8 point as the average on a 30-year fixed-rate mortgage. Rates were last as this level in July 2011.

While there have been a number of media reports that state rising rates will not deter people from looking for a new home, we have heard differently. So, prospective homebuyers, has this jump in rates resulted in you delaying your search for a new home? Let us know in the poll below. And if you have stopped your search, email us at .(JavaScript must be enabled to view this email address).

This article originally published at https://dc.urbanturf.com/articles/blog/poll_will_rising_rates_delay_your_housing_search/7268

7 Comments

1. ThisGirlSays said at 8:23 pm on Monday July 1, 2013:
   If the rates have gotten so high at just over 4% that you're putting your search on hold, be prepared to be on hold indefinitely.

1. NYCBloke said at 4:57 am on Tuesday July 2, 2013:
   You may be right regarding interest rates. That said, I'm bearish on DC. Too much supply entering the market on the rental side, prices are rising faster than incomes (DC is leading the nation here), and there's poor outlook for jobs as stimulus spending and sequestration take their toll. DC is a government town, not like NYC of SF which have far higher paying job markets. The DC region will see, at a minimum, flat housing appreciation and maybe a 5-10% correction. Anyone else agree?

1. OnTheFence said at 12:38 pm on Tuesday July 2, 2013:
   I also thought that sequestration, the end to federal stimulus, and the slow down of the Aghanistan war would negatively impact the DC region more than other parts of the country, leading to a correction in one of the otherwise lone bright spots in the housing market through the recession. However, things haven't seemed to cool off, yet.

1. Michael said at 2:22 pm on Tuesday July 2, 2013:
   As long as rates are below 9%, and you plan on living in your home 5 years... you should buy in DC because you'd end up making money.

1. C said at 3:57 pm on Tuesday July 2, 2013:
   NYCBloke, I'm not agreeing or disagreeing with your comment. I'd like to know why you are bearish on the DC housing market when there is too much supply entering on the renting side? Maybe it's obvious to most people but it isn't to me. Grateful for an explanation or clarification. If there are so many rental places on offer, doesn't that make whatever buying inventory there is even more appealing/valuable? Thanks

1. NYCBloke said at 1:39 am on Wednesday July 3, 2013:
   C, buyers market prices are influenced by rental market prices in two key ways. First, on the demand side, buyers are evaluating purchase decisions based not just on expected asset returns but also cash flow/incomes. People who get good deals from their landlords are more likely to sit on the sidelines for a bit longer, especially when the gap in cash flow is as big as its gotten (eg their mortgage may be a good bit more than their rent) and 4-5% cost of capital. This behavior wont be the case for everyone but it will be for at least a segment of the market and that drives down demand and thus prices. Second is on the investor side. DC has had a lot of investor play with people buying homes in cash, renovating them and renting them out. If their margins narrow due to rental supply increases, you'll see at least a segment of these investors putting their properties up for sale in favor of restructuring their asset portfolio. Full disclosure - I'm not a realtor, just a wall st guy and casual (not invested) observer with some family ties in NoVa.

1. C said at 1:53 pm on Wednesday July 3, 2013:
   NYCBloke, I appreciate your response. Sure, the buyers market and the renters market have some influence on each other. The additional questions I have from your answer are in NYC or DC, the rental market is generally not favorable to renters (rents are sky high), so unless you have a great deal, which would be rare, or something that might have been grandfathered in), I would think that that segment of potential buyers (demand side) would not be as great as suggested. Although renting is not the most ideal, I do think it is more accessible to some people (those who don't want to be burdened with a mortgage, the maintenance of property, who don't have the downpayment for a substantial purchase [a home is a substantial purchase], etc.). As for your point about developers buying homes for cash and renovating them, more often than not they are turned back on the market for sale (flipped). That market seems to be hot in the DC area from what I've seen. A couple of years ago, I noticed that developers who bought places for the purpose of renovation and selling actually decided to rent out the units instead of selling them outright, which was the original plan (I learned this from talking to the realtors). It was, apparently, a decision that was a change in course because the real estate market in DC had a downturn and the developer could make more money by renting out the units. I would think with the housing market being hot in DC now that that would only persuade or encourage people to the buy side of things. If you are bearish on the DC housing market, maybe it's because you think that the pace of pricing in the DC housing market has risen too fast or there isn't anything to sustain it beyond the short-term, except for all the buyers in the market these days. Partial disclosure - I am neither a real estate agent nor a Wall Streeter. I am just a casual observer.