BUYER'S MARKET? SELLER'S MARKET? I SEE CRANKY MARKET!

Kinda looks like a smile, don't it?

If you've been paying any attention at all, you know that interest rates are rising.

This is so not news. We had 10 years where the Fed rate was effectively 0%. It was only a matter of time.

But just because you see a wave coming doesn’t mean you’re going to stay dry. 

Realtors and lenders are pretty much taking the position that after years of artificially low rates, we’re finally going to return to “normal,” which is probably true. But normal isn’t normal if you’re not used to it.

A frown. That's definitely a frown.

Fun with math: For every 1% increase in interest rates, the affordability of a house goes down by 12%.

What that means is if you can afford a downpayment of $40,000 and can make monthly mortgage payments of $1750.00, when rates were 3.5%, you could buy a house that’s $430,000. When rates went up to 4.5%, the most expensive house you could afford is $385,000.

That’s a $45,000 difference.

Oh, and today? According to Wells Fargo (who by the way, I'm not a huge fan of for a lot of reasons, but whatever), a 30-year fixed mortgage comes with a rate of 4.875% (for people with stellar credit).

Normal shnormal, I say. Whenever people find out that they can afford $45,000 less house than they were planning on, they get piiiiiiiii-issed! And sellers? You think they’re going to be happy? They’re going to have to deal with people who believe they deserve more house for the money they’re spending. Which means they’re going to be a lot more demanding of repairs and concessions on the houses they end up making offers on. Then when they do sell their homes, most of them are going to buy new ones –– and they're going to think they deserve more house than they can afford. 

Grrrrrrrrr…

So let’s go back to where I started –– the thing about interest rates being increased regularly, quarter after quarter. I see a market that’s going to be cranky. Seriously cranky. And I mean for years. Every time the interest rate ratchets up, buyers are going to feel the squeeze and every time buyers feel the squeeze, sellers are going to feel it, too. 

I know what you’re thinking. You’re thinking, “Brian, it sounds like we’re moving into a buyer's market.” No, that’s not what I’m saying. In fact, based on what I’m seeing in housing supply and demand, I’m convinced the Portland market is going to remain a pretty strong seller’s market. If I had to put money on it –– and I kinda do, since this is what I do for a living –– I’d say prices in Portland are going to keep going up, even as rates rise, although not as fast as they had for the past four or five years. 

But hey, give me a call and we can talk about details, not just for Portland, but for individual neighborhoods. You can reach me at brian [at] belefant [dot] realtor or by phone at 310-854-2458.