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A Market Slowdown Is Possible If Rates Remain High

December 29th, 2017 10:26 AM by Ron Mastrodonato

A Market Slowdown Is Possible If Rates Remain High

Stable interest rates are best for the housing market. The more predictable the rates are, the more accurately companies can forecast their business projections. Businesses always love steady returns, so they’re more likely to lend and borrow when the outcome is easy to calculate.

Sharply rising interest rates can wreak havoc in the real estate market, as we saw during the 2008 meltdown. At the time, many low-doc loans existed, and, when interest rates rose and balloon payments came due, foreclosures went through the roof. The current mortgage industry has put some safeguards in place to ensure this doesn’t happen again. More qualified borrowers, in addition to well-structured mortgage loans and stable interest rates, are helping to maintain a robust market for buyers and sellers.

Currently, most Americans think it’s a better time to sell a home than to purchase one. This idea seems to be a direct response to the record-setting house prices in many markets. With houses priced near their all-time highs in multiple locations and the constant threat of rates rising, it’s worth using checkweigher or other services to stay ahead of the trends.

It seems likely that the Federal Reserve will not overdo the raising of rates. They've been very sensitive to increases as the economy continues to rebound from the global financial crisis; in fact, the rise in rates shows that the economy has become significantly stronger in the past few years. As the markets have firmed up and many lower-cost houses are now off the market, there will be less bargain-hunting and flipping in the next few years.

Mikkie Mills is a freelance writer and frequent contributor to RISMedia's Housecall blog.

This article is intended for informational purposes only and should not be construed as professional advice. The opinions expressed in this article are those of the author and do not necessarily reflect the position of RISMedia.

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Posted by Ron Mastrodonato on December 29th, 2017 10:26 AM


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