Mortgage rates have risen 7 weeks in a row, reaching their highest point since April, 2014. But Johns Burns Consulting says the housing market has weather 1%+ rate increases 10 times over the last 43 years: “Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates. When rates rise during a weak economy, home sales and prices get crushed.” John Burns’ survey of 300 home builders showed that only 15% expected sales volume to drop significantly if rates went all the way up to 5%.
Rates do matter, though. In Redfin’s home buyer survey, only 6% of the respondents said a 5% rate would cause them to abandon their plans. But 21% said they would have to scale down their budget. In the Seattle area, hefty property tax increases further reduce buyers’ purchasing power, even as prices continue to rise.
CoreLogic predicts that interest rates will rise by 0.85% between Nov 17 and Nov 18 while median house prices will increase by 2.6%. These two factors, along with inflation, will add 15.5% to the typical mortgage payment.
The National Association of Realtors reports that housing inventory has decreased for 32 months in a row on a year-over-year basis. Existing home sales sank 3.2% in January compared to last December, which doesn’t tell the whole story. It dropped by only 1.3% in the South while plunging 9.5% in the West. The percentage of first time buyers fell from 32% to 29%. This is comparing apples to oranges, but Zillow says Seattle area shoppers have 19.3% fewer options to choose from, versus a year ago.