Term impact on Home sale

 For many reasons, some economic, while others related to the pandemic, so-called fatigue, etc., home prices in most areas have risen to record or near-record amounts! Due to a long period of artificially low interest rates, mortgage rates were at historic lows! Since the use of financing is necessary for most homebuyers to be able to afford a purchase, when a low rate creates cheap money and thus the ability to afford more homes - for - the dollar, prices usually go up! It allows qualified buyers to get more money / credit because the ratio of monthly mortgage to total income is artificially - lowered! How long this trend will continue, will it become the new-normal, will previous trends/cycles return, and how will price formation be affected in the immediate, medium and long term are all factors to consider! With this in mind, this article will attempt to briefly consider, explore, evaluate and discuss some of the options that need to be considered and understood.


1. Short term: Ever since the Federal Reserve announced they plan to raise rates three times in 2022 (of course this was before the potential implications and consequences of the Omicron variant), many feel pressure to act quickly, to take advantage of today's low rates before they go up ! The three increases are likely to translate into at least a 0.75% higher rate, which translates into hundreds of extra dollars a month for most mortgages. Some things to consider and pay attention to is that this rate of house price growth is unlikely to continue, especially at such a large rate! How long one expects to keep a particular house is one thing that needs to be carefully and wisely considered before proceeding!


2. Medium Term: Although many believe the exact timing of any planned rate hike is uncertain! The Fed has changed and/or changed its strategies and approaches in the past, what the medium term may bring, including potential inflationary pressures, how long economic conditions and unknown factors related to the pandemic, etc. will largely determine what this phase may bring! Moreover, the attitude and perception of buyers and their confidence etc influence this real estate market to a great extent!


3. Long Term: In the long term, will things go back to what we have seen so often in the past, which is alternating cycles between sellers, buyers and neutral markets? Possibilities include: continued major escalation; more - gradual but persistent - one; some settlement; and/or we will see, at least in certain areas, some kind of price decline, for a period of time