Fundamentals taking some craziness out of housing market
During the last 12 months 4,162 local residents took out loans to either refinance or buy a home. That’s a 54% increase from the first quarter of last year. Record-low mortgage rates are a primary driver of that increase. For those who bought a home, low rates reduced monthly mortgage payments. It gave them more buying power.
Rates began the year at 2.6%. They moved above the 3% range eight times in the following 26 weeks. For the week ending July 1 they were 2.98%.
The outlook calls for slowly increasing rates to average 3.5% at year’s end. That’s still very favorable. It will likely lessen market competitiveness, but it’s only one piece of the price picture. Inventory and construction material prices are also factors. Inventory is slowly increasing and builders are getting a little materials price relief. When combined that signals a slow softening – but not a reversal – of the market craziness that we have seen so far this year. Demand is expected to remain high. But higher mortgage rates and more inventory should ease upward pressure on prices.