In real estate, there are a lot of different markets. There is the real estate market as a whole and individual markets based on locality. The overall market is changing, as rising interest rates are eventually going to cause lower selling prices. How soon will those lower prices occur, and how quickly will they come down? Property values have gone up 20 percent in the last year, which is both a blessing and a curse depending on whether consumers are buying or selling. The US is currently experiencing a mixed market where prices are declining in some cities as a result of rising interest rates, while in other areas, buyers are seeing an increase in interest rates without a corresponding decrease in real estate prices, making it difficult for them to afford to buy there.

Another factor to consider is that with every percentage point the rates climb, $100 per each $100,000 is added to a monthly mortgage payment. That means if a mortgage is $500,000 and the rates go up three percent, it will cost an extra $1500 a month, which can price many people out of the market. Some are concerned this will lead to a repeat of the 2008 real estate crash, but many safeguards have been put in place since then to help avoid a recurrence. The way loans are processed today is much different, with a standardized mechanism designed to monitor how Freddie Mac and Fannie Mae purchase loans from lenders.

In this mixed market, there is an indication in some cities around the country that the momentum in the rising of real estate prices and interest rates is slowing. To use a sports analogy, the current climate is a marathon, not a sprint, so patience and staying focused on the preparations for that house once the market comes down and more properties are available will help buyers in the long run. Jeff’s guests include:

– Stacy Hartmann (PacRes Mortgage) talks about the normalization of rates.

– George Gonzales (Malibu Funding) explains buy downs when negotiating mortgage terms.

– Gayle Whiting (Malibu Funding) discusses the role of lenders in setting rates.