Housing market cools, but interest rates rise (VIDEO)
Sellers are taking advantage of the market, driving prices down with more inventory, but interest rates may not improve affordability.
Prices are finally falling in one of the most expensive real estate markets in the country. But as interest rates rise, housing affordability moves more slowly.
“Either you’re going to have to pay more for that house because the loan is going to cost more, or you’re going to have to cut back on the type of house you want,” said Michelle Singletary, author of “What To Do With Your Money In Case Of crisis.”
Some experts especially urge first-time buyers to wait.
“I think right now it’s an opportunity for the market to calm down a bit, although there’s still a big seller’s market,” said David Hall, a mortgage lender.
Experts and forecasters see a cooling of the market in some cities and a balance that tips more in the direction of the buyer. But we are not heading for a national stock market crash.
“This is not a situation where the price is going to drop drastically,” said realtor Sindy Ready. “These will be small corrections.”
Sellers are slashing asking prices in the west, where home prices hit some of the highest levels in the country amid the boom earlier this year. In Southern California, the median home price fell more than 1% in July — now $20,000 less than its spring peak, according to real estate firm DQNews.
“Someone who is not a cash buyer may actually be able to buy a home, so from a buyer’s perspective, now is a good time to enter the market,” said Ready.
As sellers try to take advantage of the seller’s latest bargain, they improve inventory for buyers, helping to speed up the cooling.
Now the Federal Reserve is considering another interest rate hike next month.
“Date the rate, marry the house,” said Frank Fuentes, loan officer at New American Funding. “Buy your home and you’ll have the option, whether it’s six months, a year or a year and a half from now, to refinance and lower your interest rate.”
Another hike could make homes more expensive for borrowers, but it could also help lower freshness.