What rising mortgage rates mean for Portland home buyers in 2017
We have enjoyed our historically lowest mortgage rates for some time and after seeing the spike in the interest rate after the election, I became curious as to whether this is leading to a continuing growth of the rates or a temporary spike from some optimism in certain economic sectors. Although no one can accurate predict the future, a number of mortgage forecasts for 2017 based on expert opinions and close observation of the market indicate the mortgage rates are only going up in 2017. Read this article from Inman News for additional insight on the issue. As of today, the rates have climbed significantly since October 2016 almost by 0.5 point! Now the rates are around 4.03. The bad news is that this is the new low for mortgage rates for coming years. The glory day of 3.3%-3.5% mortgage rates for fixed 30 year term is over.
Just to put things in a perspective, look at below graphs. This is where we have been with mortgage rates. It has been unprecedentedly low.
What does this mean for Portland home buyers in 2017?
This new and continuing rates hike will decrease the housing demand. This could slow housing price hike but according to the 2017 Portland housing market forecast, the prices are still expected to increase somewhat still in the next couple of years in Portland as the Pacific Northwest market is still hot. Low supply will not magically turn upside down although we do see some more construction of town homes in various suburbs. You may not see bidding wars like we have seen like in 2015 and 2016.
For those who waited to buy in 2015 and 2016, things just became a little more difficult for you and it will continue to be. If you wait till the end of 2017, things will be a lot more difficult because the rates will go up even higher as Federal Reserve is expected to raise rates once or twice in 2017. So as painful as it is reminiscing the low prices in the old days coming out of the Great Recession, it is time to strike. Waiting longer will only mean delayed and more difficult home ownership.
What does this mean for Portland home sellers in 2017?
You will not be able to sell your homes as quickly anymore. Homes will sit on the market for longer due to there being less qualified home buyers in 2017. The market will no longer be seller’s market but somewhere in the middle. That means you will need to have some flexibility for home buyers during negotiation because your next buyer will be less willing if you can find any. It is important for real estate agents to explain the market trend to sellers and buyers to adjust their expectation for 2017 market. Realtors can do a good job in showcasing a property, but eventually it’s the market that has a great force in bringing deals.
It is also relevant to realize that Portland homes are still cheaper than other neighboring markets on the West Coast. Out of state and cash buyers will still continue to buy homes in 2017. Moreover, our strong job market will add additional confidence in many home buyers even with 4 point mortgage rates, especially first time home buyers.