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With the latest rise in mortgage rates over the last month, many fear that home sales will decline as a result. The truth of the matter is that with the nominal rise in rates, that won’t slow down homes sales much at all. Many of the recent homes sales in Maricopa County have been sales from “cash” buyers. Many investors have helped to fill the gap with regards to the distressed housing market and many of those homes were purchased and now being rented. Many people who were effected by the economy and that had to short sale or foreclose on their home are now renting many of these “cash sale” homes.
While interest rates do effect the end mortgage payment for a buyer, rates will still have to dramatically climb, and house prices would have to continue to surge to make a true slow down happen.
Mortgage rates are still very affordable and continue to be in the 4% range and that still makes it very attractive for home buyers to continue to purchase. Many home owners have also been able to capitalize on this low interest rate environment and have been able to refinance and lower their current housing payment. With the housing appreciating, many others have been able to sell as a result and then take advantage of a new home at low interest rate as well.
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Phoenix, amoung a few other cities, hit one of the highest year-over-year price increases. According to a Case-Shiller report recently released, Phoenix hit 23% for the past year with San Francisco, Las Vegas and Atlanta not too far behind. This is largely due to the mix of low mortgage interest rates and investor buying.
With the lack of distressed properties (short sales and foreclosures) bringing prices down, many sellers now have an equity position due to the price increases over the past 12-24 months. This has led to sellers being able to sell their current residence and purchase a move up home that is generally bigger or in a more desirable area. Many first-time buyers have also entered the market. First-time buyers typically represent 30-40% of the buyers pool at any given time.
This year’s housing growth rate represents the largest growth rate since 2006. Another variable that often goes unnoticed is the number of homes that have been remodeled. Many homeowners, as well as investors, have significantly improved homes over the past couple of years. This trend has helped fuel home sales and increase overall value to the homes and communities. Owners that renovated their homes in the past are now seeing large gains and significant return on their investments. Many homeowners also took advantage of low mortgage rates and refinanced, saving them hundreds of dollars per month and aiding in renovation budgets for kitchens and baths or other value added items such as pools and better landscaping.
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