5 Reasons Rising Interest Rates Won’t Undermine the Housing Market

Interest rates have been trending higher since the fall of 2017, and I fully expect they will continue in that direction – albeit relatively slowly – as we move through the balance of the year and into 2019. So what does this mean for the US housing market?
It might come as a surprise to learn that I really don’t think rising interest rates will have a major impact on the housing market. Here is my reasoning:

1. First Time Home Buyers
As interest rates rise, I expect more buyers to get off the fence and into the market; specifically, first time buyers who, according to Freddie Mac, made up nearly half of new mortgages in the first quarter of this year. First-time buyers are critical to the overall health of the housing market because of the subsequent chain reaction of sales that result so this is actually a positive outcome of rising rates.

2. Easing Credit Standards
Rising interest rates may actually push some lenders to modestly ease credit standards. I know this statement will cause some people to think that easing credit will immediately send us back to the days of sub-prime lending and housing bubbles, but I don’t see this happening. Even a very modest easing of credit will allow for more than one million new home buyers to qualify for a mortgage.

3. Low Unemployment
We stand today in a country with very low unemployment (currently 4.0% and likely to get close to 3.5% by year’s end). Low unemployment rates encourage employers to raise wages to keep existing talent, as well as to recruit new talent. Wage growth can, to a degree, offset increasing interest rates because, as wages rise, buyers can afford higher mortgage payments.

4. Supply
There is a clear relationship between housing supply, home prices, and interest rates. We’re already seeing a shift in inventory levels with more homes coming on the market, and I fully expect this trend to continue for the foreseeable future. This increase in supply is, in part, a result of homeowners looking to cash in on their home’s appreciation before interest rates rise too far. This, on its own, will help ease the growth of home prices and offset rising interest rates. Furthermore, if we start to see more new construction activity at the lower end of the market, this too will help.

5. National versus Local
Up until this point, I’ve looked at how rising interest rates might impact the housing market on a national level, but as we all know, real estate is local, and different markets react to shifts in different ways. For example, rising interest rates will be felt more in expensive housing markets, such as San Francisco, New York, Los Angeles, and Orange County, but I expect to see less impact in areas like Cleveland, Philadelphia, Pittsburg, and Detroit, where buyers spend a lower percentage of their incomes on housing. The exception to this would be if interest rates continue to rise for a prolonged period; in that case, we might see demand start to taper off, especially in the less expensive housing markets where buyers are more price sensitive.
For more than seven years, home buyers and real estate professionals alike have grown very accustomed to historically low interest rates. We always knew the time would come when they would begin to rise again, but that doesn’t mean the outlook for housing is doom and gloom. On the contrary, I believe rising interest rates will help bring us closer to a more balanced real estate market, something that is sorely needed in many markets across the country.

Washington Waterfront Home Tour June 23-24 1-4pm

Is waterfront right for you?

The dream of owning a beachfront property runs deep in the Evergreen state. Back in the early 1900s, city dwellers escaped their Seattle homes on the weekends and Summers to enjoy the many pleasures of waterfront living. Today this tradition is still very much alive among Seattleites. Whether purchasing beach retreats to recharge their batteries or moving permanently on the water’s edge, waterfront properties are popular as they mean a vacation-like lifestyle all year round.

This weekend, June 23-24, from 1-4pm, Windermere Real Estate and Komo 4 are sponsoring their fourth annual Washington Waterfront Home Tour. It is the Puget Sound’s biggest waterfront tour spread over two days. It is the perfect opportunity for anyone thinking of beachfront. You will be able to explore neighborhoods, types of beach, and prices. https://www.waterfronthomeswa.com/

We have four properties on tour this weekend, all exceptional and different in their own respect.

#1. 2681 SW 151st place, Burien    Open Sunday 1-4pm  http://pugetsoundhomes.withwre.com/listing/71507717

#2. 2155 SW 173rd Place, Three Three Point    Open Sunday 1-4pm http://pugetsoundhomes.withwre.com/listing/79697110

#3. 26916 9th Avenue S, Woodmont    Open Saturday & Sunday 1-4pm http://pugetsoundhomes.withwre.com/listing/80445154

#4. 27014 10th Avenue S, Woodmont   Open Saturday 1-4pm  http://pugetsoundhomes.withwre.com/listing/79742963

We are looking to see you all. Call us to schedule a private showing if these days and times don’t work for you. Veronique@windermere.com or text/call 206-214-8499

 

 

Looking for acreage & views within a short commute to Seattle?

Over 16 acres of glorious forest, streams and views. Along the shores of Puget Sound, within a 30 to 40 minute drive to Downtown Seattle, lies this beautiful property which includes two tax parcels: #3222049115 & #3222049019. A rare opportunity to build one’s spectacular retreat steps away from the quaint community of Redondo: its boardwalk, restaurants and beach.

Hard to believe, while hiking through the lush vegetation that, close by, lies a thriving and bubbling metropolis well-known for its fast pace and cutting-edge technology.
Land bank, secluded retreat, private home with cool modern architecture, serene spa, trails and cabins? So many potential options for this superb property which reflects so well the true spirit of the Great Pacific Northwest.

The land is abutting another 10+ acre property destined for a 36-high-end home development. Click here to get the detailed listing. Purchasing both pieces, would mean a total of 27 acres. The upper parcels could be turned into a luxury contemporary development while the lower ones (listed here) be used as serene retreat with trails and community house. Many options!

 

Fairy Tale French Estate Perched Above Puget Sound

 

If you have ever wandered through France and its Loire Valley countryside with its deep forests, laughing streams, charming historic villages and spectacular castles, this estate will remind you of these cherished peregrinations or simply make you dream.

Built above Puget Sound with endless views of the shimmering water, the Olympics snowy summits and the wild islands across the channel, this 1937 fairy tale estate will transport you in a different time and place.

Open the wrought-iron lion gate, follow the tree lined-driveway along lush gardens, espalier apple trees and discover this delightful manor surrounded by stone patios, fountains, courtyards & arbors.

Inside a feeling of warmth and refinement allied to modern comforts: venetian chandeliers, stately marble & stone fireplaces, curved railing & Provencal kitchen. The sunken living room soothes of elegance with its historic flavor. Four priceless oil murals speak of shepherds and pastures transporting you into the 18th Century Europe.

From every room, doorway and window, catch a glimpse of the incredible outside world and its natural beauty. Come visit this spectacular estate that will take your breath away only a short distance from Downtown Seattle, WA. $2,650,000.

Take a peak with this video.    Visit the detailed listing & photo gallery.

Timeless Waterfront Beauty for sale

Within a mere 35-minute-drive to Downtown Seattle, rests this incredible 1.2 acre gated estate perched above Puget Sound: a graceful 6300 square foot home with endless views where time seems to stand still. As the wrought-iron gate opens and the property reveals itself, one cannot help but fall under the spell. Built in 1929, the main house offers generously-sized rooms including an expansive living room; perfect Vintage details such as luxurious mahogany millwork, crystal chandeliers, original glass door knobs, period tile work, coved ceilings; beautiful hardwood floors (well-protected under the plush carpeting) and walls of picture windows/doors to capture incandescent sunsets & wild storms.

Each of the four master en-suites has its very own flavor and scheme giving a dramatic yet fun dimension to the home “the blue velvet master”, “the vibrant pink room”, “the soothing white guest bedroom” and “the hip orange-golden room”. The lower level represents THE quintessence of entertaining between the built-in bar & its kitchenette, the game room, the workshop and the gigantic rec room open to the brick patio, heated pool & cabana.

An easy walk down to the private 180′ beach. Explore the grounds, pick apples, plums and berries from the orchard, take tea under the gazebo, breath in the salty air from Puget Sound, watch bald eagles fish right before your eyes… in a word experience the best of the Great Northwest in this bit of hidden paradise!

Watch the video.  Click here to see the photo gallery and detailed listing.

2017 REAL ESTATE PREDICTIONS

Each year I take time to review what has happened during the year and to look forward to predict what is in store for real estate. Below are my predictions for the 2017 real estate market, based on data that was available at the time this was written:

Median Sold Prices – Home prices will continue to increase nationally by single digit numbers, about 5%. However, urban metro areas with high employment or that are in high demand by Millennials may still see increases at 10% or above. According to the National Association of REALTORS®, October’s national median price for existing single family homes was $232,200, which represented a 6.0% increase over October of 2015 (which was the 56th consecutive month of year over year gains). National inventory shortages coupled with high demand will continue in 2017.

Housing Inventory –  Although there are improvements in this category, it will take more than just a year for the situation to turn around. Our inventory shortage was caused by a shortage of housing starts that began during the recession. We will continue to see inventory challenges until new construction picks up even further. I predict that more buyers will be entering the market for a home as our economy is strong with low unemployment. According to the Bureau of Labor Statistics, the national unemployment rate stands at 4.6% for November, 2016, which is the lowest it has been since August of 2007. High demand and low new construction means a continued inventory crunch.

Housing Starts – Housing starts (the measure of homes that began construction) jumped from 900,000 in 2015 to 1.3 million in 2016. Although this is a welcome increase, it is still not enough to quench the demand. Our country needs about 1.5 million new starts per year to maintain inventory, but since 2009, we have been short a cumulative 5 million units. This is one of the primary causes of our inventory shortage and what is driving prices up – demand outweighs supply. In 2017, I predict that builders will finally surpass the 1.5 million start target and our inventory shortage will begin to wane by mid-2018.

Second Home Markets – Investment and vacation homes markets will continue to be strong in 2017. The passing of wealth from the Silent Generation (1925-1945) to the Baby Boomer Generation (1946-1964) is a strong driver of vacation home purchases. Investment properties are a hot commodity, especially in urban areas where rents are skyrocketing due to a shortage of housing.

Interest rates – The improving economy and almost full national employment is a sure sign that interest rates will continue to increase in 2017. The new rates will balance job growth and higher inflation rates. The Federal Reserve increased interest rates a quarter of a percentage point at its December meeting. The federal fund rate has a significant effect on mortgage rates. I expect the 30 year fixed rate mortgage rate will reach 4.75% by the end of 2017.