Last month I talked about the Taper and how this government slow down in buying bods would lead to the increase in interest rates.
I did the math for you and showed you haw a one percent rise in interest rates could mean as much as $300 more per month for a $500,000 house.
That should have a huge negative impact on home prices, right? Less people can afford the homes leads to less demand leads to lower prices. Got it. Historically this is not the case.
This graphic illustrates 4 periods of large increase in interest rates- in each period real estate values went UP.
Why does this happen? In our free market economy interest rates rise when the economy is growing, when it is doing really well. What also goes up when the economy is doing well? Housing prices.
Bottom line- 2014 will be a great time to move for BOTH home buyers and home sellers. The Repeat Buyer has the means and the ability to make that next move. This will open an opportunity for the first time buyer- The Millennial. Interest rates will rise, but this is more likely to motivate fence sitters into action, loosening up the inventory and leading to a robust 2014.
Cheers everybody! Let’s get moving!