Rising mortgage rates and increased equity is putting homeowners in a unique position to not sell. New household formations will be looking for resale properties, but may be pushed into rental or new homes instead. How will this affect your strategy?
During CoreLogic and the Urban Institute’s Housing Finance, Affordability and Supply in the Digital Age conference Wednesday in the District of Columbia, CoreLogic Chief Economist Frank Nothaft predicted rising interest rates will cause home prices to rise.
Mortgage interest rates are expected to continue rising over the next couple years as experts predict the Federal Reserve will raise the Federal Funds rate in once more this year in December and up to four more times in 2018. CoreLogic forecasted it will rise to 4.7% by December 2018.
Nothaft explained as mortgage interest rates increase throughout 2018, less current homeowners will be motivated to sell their home, wanting to keep their low interest rate. This will then lead to less homes coming onto the market, and will squeeze the already tight housing inventory.
While commenting on the panel, First American Financial Chief Economist Mark Fleming agreed it could hurt housing supply, saying, “There is no reason the current homeowner today will want to sell.”
Nothaft predicted home prices will rise yet another 5% in 2018, benefiting current homeowners as their home equity increases. CoreLogic data shows the average homeowner gained $13,000 in home equity in just the past year. In Washington, where Seattle saw a surge in home prices, homeowners gained a full $40,000 in equity since last year.