Interest rates affect sellers and buyers differently.
If you are a seller:
The first quarter traditionally (and predictably) sees fewer homes on the market. This translates into a robust sales environment, mitigating the potentially dampening effect of elevated interest rates. The East Bay remains one of the nation’s most desirable places to own a home; for every 5 new jobs created, a single new home enters the market. As the East Bay continues to attract new businesses, this disparate ratio of property to jobs is may continue to grow. As a result, home prices should continue to climb despite subtle rate hikes, and as long as inventory remains low, we believe the market will only become more advantageous for sellers in the near term.
We do appear to be in a more rational market than the markets of 2006-2008 during which we experienced a series interest rate hikes that oddly married with price increases. Usually, as interest rates go up, buying power goes down. During the period described, we were in what we’d call an ‘irrational market’.
The last few years we have had opportunities to test and assess the local housing market. As rates have hinted upwards in the last few years, the market has subtly softened, so we do believe we are in our (watered down local version) of a more ‘rational market’, so if interest rates do continue upwards and inventory rises, our market should plateau or soften.
If you are a buyer:
Don’t despair, but get smart and strategic. In the current market, as ever, the team you build (Realtor, lender, inspectors, etc) can have a profound effect on both your purchasing success and your experience at large. Make sure your team not only knows how to get the job done — leveraging relationships and market knowledge–but ensures you get the best value for your money. Find a competitive edge. Find support. Find professionals who truly have your best interests at heart.
One more thought: if interest rates go up and prices do soften, we believe that is good for you. You do not need to feel pressured by rising interest rates as they could serve you. Interest is tax deductible, property taxes are assessed based on sale price (so a less expensive house will permanently have lower property taxes) and one day when interest rates go down, you can re-finance. The price paid never changes. So if rates go up, don’t fret…as long as prices come down…