Today Interest rates

[Aman Shahi]

Today Interest Rates have surged up to almost 3.7 or 3.8. What kind of affect are we projecting on market as investor point of view. How could we evaluate the price of the properties that are available for sale and the one we bought.

[Marcus Auerbach]

The notion that higher rates will slow down the market has been proven false so far. What rising interest rates have done so far is create urgency in the market. Buyers want to make sure they go under contract and lock rates in asap. 

A number of clients have actually told me that - this has been heating up bidding wars here in Milwaukee in the last weeks, especially in the middle and upper price points, where rates get amplified by large mortages. Especially in the middle and higher price points it means people can save huge amounts of money over the life of the loan.

If someone wants/needs a house the interest rates don't make much of a difference. In Wisconsin the median income can still buy almost two median homes, so affordability is still very good despite the price increases we have seen. When rates rise some more people will run into DTI limits, meaning their pre-approval amounts will be lower.

This will make the luxury segement unaffordable again for middle class buyers and push some middle class buyers into lower price segements. I don't see the market slowing down until we start building more houses, which is currently not happening in our area. 

We are building 5 houses here and 3 houses there in the suburbs and they arrrre all 600k and up. We would literally need large scale developments like Milwaukee has seen in the 1960s when homes were built by the ten thousands every year to start easing the shortage.