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Interest Rates

Mortgage RatesThe FED raised rates by a half percentage point last week. This will certainly give some buyers pause as it reduces the price of the house they can buy. For example, in buying an $800,000 home, a half percentage point would raise the mortgage payment by $250/month. That is a pretty significant hit. The FED plans to raise rates by another percentage point over the next few months. Which means overall, buyers will pull back on the price of a house they can afford.

However, with record-breaking absorption rates persisting in both the single-family and condo markets, prices are unlikely to level off in the near term, despite rising interest rates. Prices are not likely to decline in the near term. Buyers will wind up ratcheting back what they can afford.

On the other hand, the days of fantasy pricing are likely winding down. By that, I mean Sellers throwing out prices way above market value just to see if they can get it. To illustrate the point – in aggregate across Massachusetts, 879 listings had a price reduction in April compared to 694 listings with price reductions in March. Locally, in Newton, 13 listings in April lowered their price compared to 11 in March.

The biggest challenge agents have had this year is working with Sellers who feel stuck because if they sell their house, they are afraid they won’t find a suitable home to buy in the current market. There are options to solve that dilemma, so if you are thinking of selling, Contact Us.

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