Real Estate to Cool, Renters & Sellers to Take Hit

Even though mortgage rates have spiked recently, they are still very low in historical terms. In part, these low rates have assisted a rebound from the abyss in housing. But it should be noted most markets are still off their high water marks, with some “bubble” regions down 30% – 40% from their peaks. And sooner or later the government has to address reforming real estate financing. It’s one of those rare issues both sides of the aisle agree change is necessary even if their respective methods will no doubt vary, as Binyamin Applebaum’s analysis in The New York Times explains.

If mortgage reform materializes, which is likely, the corresponding rate increases will further slow what is already a decelerating housing market. Those who benefit from sales of single-family houses (condos as well) — realtors and flippers — will take a hit. Tight and more expensive credit limit sales, which limits appreciation, which limits profit and the impetus to sell. If you’re a renter, hoping to be a buyer, it’s not a very attractive scenario. Buy your home at a higher rate of financing, if you can qualify in the first place, and have little hope that it will substantively increase in value over time. This is an entirely new mindset for the United States, but one that is likely taking more hold. This reality has and will continue to produce more renters, which will increase rents. This isn’t a very exciting or appealing scenario for most. But maybe it’s simply a dose of reality that we’ve been avoiding for years.

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