These blog posts are meant to share my findings, adventures, needs etc while seeking out real estate in Orange County, California. They are in no way meant as a source of advice, financial or otherwise or a solicitation of funds. If you are in the market to buy or sell real estate or trying to make a financial decision, please consult a professional who is familiar with your needs and your financial situation. Everything on this blog is merely an expression of my opinion.
Tracking interests rates is not something I do on a daily basis due to the constant fluctuation of rates. My preference is to follow longer term 2-3 month trends when it comes to interests rates, however, when rates spiked over the 4th of July weekend, see article here, I couldn’t help but wonder the effects on the real estate market especially since I had just put in an offer for a property in Dana Point. From reading various sources the common consensus following a significant interests rate rise seems to be as follows
[edit] After further thought, I believe potential buyers will get off the sidelines first increasing home buying activity, especially among first time home buyers. This probably took place from Jan-April 2013
1. Home buying slows down relative to the pace set in 2012, especially in the move up category of real estate. However, relatively strong buying activity will continue for a few more years. Guessing till about 2016?
2. Home prices start to fall as a result of lower activity in 2016 and beyond as a national statistic.
However, my personal thoughts is that the OC market will likely
1. Still be in a fairly short supply of housing till around 2015 or 2016. However the price rise is bringing in more sellers into the market as their houses are no longer underwater, moderating the price appreciation of 2012.
2. The rising interests rates would likely slow price growth from the previous approximately 13% YOY , however, given the shortage of inventory, I still see the prices rising, perhaps at a more moderate pace of 7-8% perhaps?
3. Rising yields from Treasury Bonds will likely attract investors to shift from real estate to other forms of investing, easing buying competition.
Some questions I am researching
1. Will rents rise as more potential homeowners get shut out of the market and forced to rent instead?
2. How significantly will buying activity fall as rates rise? Besides the exodus of potential homeowners, I will need to consider investors leaving for other forms of investments.
[Edit] 7/22/2013 As I guessed, buying activity has slowed slightly in the month of May given the upward movement of the interests rates over the last few months. Furthermore, I believe other investments are starting to seemingly offer better yield, such as the new highs hit by the stock market or increasing bond yields. However, I am still bullish on the housing market due to the strong underlying demand as seen from the continued price rise and the shorter days on the market of the houses put up for sale. To read more, check out the link here.
Anyone in the market to buy or sell a home, feel free to leave your thoughts in the comments section.
