We are quickly entering the ‘new normal’ zone, described by many close to the industry and explained in the following real estate market update report for the 3rd quarter of this year. Many brokers are reporting continued traffic but not at the same pace they saw from February and March forward. According to Corelogic, the one predominant factor in the downslope is the rising interest rates. Discussion in the Federal Reserve regarding the cessation of economic stabilization objectives set forth in the Quantitative Easing program have driven interest rates up 100 basis points since may. Many published forecasts are weighing the consequences of rising interest rates in conjunction with some of the extraordinary medium home price increases witnessed in many areas of the country. The combination of the two is projected to decrease demand for mortgage origination. Many would be homebuyers may no longer qualify for the price home they desiring or possess the credit, the downpayment or other factors.
Buyers still in the market who require financing would do well to have sit down meetings with their lenders and discuss their intentions to purchase, mapping out pre-qualifications strategies. A shortage in the inventory market has continued to present challenges even for pre-qualified buyers as many purchases during the 2nd and 3rd quarters were cash purchases and drove a ‘offer of cash’ seller behavior that has wained in the mid-priced homes but is still being seen in the luxury home market.
While the pace of purchases has slowed, the effects of dramatic increases in demand are still being felt in the market place. Those close to the real estate industry have surmised that the startling number of cash purchases artificially drove up housing prices in many sectors of the country and at a much quicker pace than anyone could have predicted.
Long term, the rise interest rates, while a burden for those seeking mortgages, is being valued as a stabilizing factor in the market and part of what is necessary to create a sustainable landscape for the real estate industry going in to 2014.