Involved In Real Estate · Castle Rock, CO · Member since 2014 · 3 posts · 0 votes
There is much discussion that, if interest rates rise, the price of houses in Castle Rock, CO will not continue to rise or not rise at the current fast pace. The assumption is that people base buying decisions on the monthly mortgage interest rates. However with the shortage of housing across the entire U.S., will that actually slow the increase in prices. I think there are 2 factors in place. 1) There is a lot of money in the system and 2) Higher mortgage rates will price many people out of the market. So there will be less buyers who can compete, but there will still be many buyers in the market trying to purchase their "future", whether that be a primary residence or investment properties for retirement income. What are your thoughts?
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
4y
@Jim Garcia most people buy based on payment. This is true of owner occupied and investors. Raising interest rates will cool the housing market. This is why the fed was buying all the available mortgage backed securities over the last year. They did this to keep interest rates low to stimulate housing and the economy. They are winding that down as we speak, which means that MBS need to find other buyers. This is pretty much guaranteed to force rates higher as institutional investors will seek higher returns. It may not mean a fast move in rates and it may just cool the market a bit.