RISMedia's Real Estate Magazine

AUG 2013

Real Estate magazine is the industry's leading source for real estate news and information since 1980. Published monthly by RISMedia, Real Estate magazine offers timely and relevant real estate news to the industry's top brokers and agents.

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{Business Building} Rising Interest Rates Won't Slow Down All Buyers by Margaret Kelly M any of you are seeing it in the feld: Low inventory, houses fying off the market and a groundswell of demand from buyers. As a result, home prices are steadily increasing. Combine all those factors with signs of strength in the economy, and you have a recipe for another market change: higher mortgage rates. The average for a 30-year fxed-rate mortgage jumped to 4.29 percent in early July—nearly a whole percentage point above where it was in early May, according to Freddie Mac. While some industry watchers predict that rising rates could stall the positive momentum in housing's recovery, I tend to agree with the school of thought that says the rebound will continue despite upward ticks over time. Rates are still historically low compared to what they were before the recession hit, and prices are still affordable in many areas. Will some homebuyers see a decrease in their buying power if rates climb too far, particularly young, frst-timers or low-income families? Unfortunately, yes. But it won't affect all buyers. Recent data reported by the MBA notes that although we're seeing slight dips in overall mortgage applications as rates increase, conventional home loan applications are picking up by a few percentage points. This indicates two things: 1) people with steady incomes and employment, a sizeable down payment, and strong credit are fnally coming off the sidelines to buy before rates go up further; and 2) many 48 August 2013 RISMedia's REAL ESTATE of these borrowers are more than likely move-up or repeat buyers who saw the equity return to their homes and were able to fnally sell so they could make their next move. Recent data reported by the MBA notes that although we're seeing slight dips in overall mortgage applications as rates increase, conventional home loan applications are picking up by a few percentage points. Perhaps you know of potential buyers who have been waiting for the bottom of the market. If what we're seeing is any indication, the bottom has come and gone. We're in a steady recovery, and now's the time to encourage those would-be buyers to explore their options. It's worth noting, though, that home prices and mortgage rates could go up more as demand continues to outpace existing supply and new construction. These recent market shifts are an opportunity for you to shine a spotlight on your professional expertise, as well as employ creative marketing strategies to communicate these trends to your entire database of contacts. Use local and national statistics to show them what's happening in real estate. If you know of potential buyers who've been waiting it out, tell them what's going on in frank terms, then connect them with a trusted lender who will show them what their monthly payment might look like at the current mortgage rate for a property within their price, as well as a comparison of what it might be if rates reach 5 percent or more. Seeing the numbers in black and white could be the impetus indecisive buyers need to make their big move. It's natural for some people to panic a little when they see home prices and mortgage rates make big jumps, but it's an inevitable part of the crests and troughs of a housing cycle. Remind homebuyers and sellers of your value by giving them the facts without the frills. With the right approach, you'll help get those buyers and sellers off the sidelines and back into the game. RE Margaret Kelly (CRB) is chief executive offcer of RE/MAX, LLC. For more information, visit www.remax.com.

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