Real Estate Values:
Low Mortgage Rates Making US Homes More Affordable
Real Estate Values & Mortgage Interest Rates Engaged In A Balancing Act
In these pages we have been reporting for a while now on rising real estate values here in California and around the country. The affordability of homes is still good because low interest rates on mortgages are offsetting the rising cost of housing.
However, many analysts are now seeing a crunch coming with any rise in interest rates from their current levels. The problem is that incomes are not rising along with real estate values. Incomes are remaining stagnant. That means that even if current interest rates remain the same, homes will become more un-affordable as prices rise out of the range of most buyer's income. Should interest rates begin to rise the problem will be even more serious.
Here's an article from PropertyWire with all the details:
"At the end of the fourth quarter of 2012, with mortgage rates in the 3 to 4% range, US home owners paid 12.6% of their monthly income on mortgage payments, down 36.9% from historic, pre bubble norms." …Property Wire"
Real Estate Values May Be Looking At A Correction Of Some Kind
The upshot of the article is that in all probability real estate values will have to level off and remain stagnant while incomes catch up. In some areas, where the rise in prices has been the steepest, values may even have to retreat some to adjust. Markets need to stay in "balance". The balancing act between real estate values, mortgage rates, and the incomes of home buyers is a delicate one, and it's reaching a tipping point. Look for prices to level off soon and possibly to pull back from current levels as the market waits for incomes to catch up.
Real Estate Values.