As interest rates snuggle up to 8%, we find ourselves in a place that we have not been in 23 years!
The Status Quo
An entire generation of business people, home buyers and home sellers have become comfortable with interest rates in the sub 5% range. Despite the longer history of rates being higher on average, buyers are not willing to jump into to days market. With this higher rate, the number of buyers willing to jump in will drop.
Prices Are Likely To Give
If we stick to basics, it is about supply and demand. With interest rates on the rise, which reduces the number of buyers in the marketplace – that should result in a drop in prices, assuming that the inventory does not also drop to match demand. This is what happened with the last drop in buyer interest. There were fewer buyers, but the inventory dropped by more than buyer participation.
Pressure On Sellers
The factor that might just change it all is the economic pressure on home owners. That was the missing element last time around. However, if more homeowners end up in a position where they need to sell, rather than it being a choice – that would boost inventory and ultimately lead to lower prices.
So What Might Put Pressure On Sellers
We touch on it in todays podcast. There are many things happening that spell tougher economic times ahead. Huge auto loan defaults, indicators of recession continue to build.
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