WalletHub recently announced its 10 financial predictions for 2017. 2017 Predictions
It is predicted that the Federal Reserve will raise the key rate twice in 2017. Interest rates and and mortgages will follow suit.
WalletHub's prediction of a single rate hike in 2016 came true....
How will higher interest rates affect home sales? WalletHub forecasts home sales to be higher. They predict home sales to hit 6 million next year.
The below normal mortgage interest rates helped home sales get back on their feet.
But it is no secret. As interest rates increase to more normal levels the cost of buying a home will increase. You can buy a more expensive home when the rates are lower. If you already qualify in the lower home price market, this could totally change the type or location of home you can buy. This could be mean for example that you may have to look at town homes or condos instead of a single family home.
It could also put pressure on home prices. We have been seeing home prices increase over the past year. ( Great for sellers). Higher interest rates could potentially slow that growth. (Good for buyers) It will vary though depending on how well prices recovered in different areas. There are still areas where home prices did not rise as much and are still undervalued.
Robert Eyler, director of the Center for Regional Analysis at Sanoma University says that “If interest rates rise slowly, we may see a nice bump in home sales and mortgage availability as buyers see low interest rates slowly fading and banks have higher rates to buffer against risk.”
Everyone is waiting to see if predictions will come true in 2017. We have a new president coming in. We will all be watching.
But if you are in the market to buy a home you need to make a decision - should you wait or should you take advantage of the still below normal interest rates and buy that new house? Home prices have been on the rise but not at crazy levels in most areas. They are still at very affordable prices in most areas and are not likely to just drop as soon as rates rise. So even though higher rates may slow this increase, it still could be better as a buyer to purchase now before the predicted rate increases.
If you would like to know how the interest rates affect how much home you can buy Click here.
If you are waiting to see if rates drop back down, you may be making a huge mistake.