Interest Rates and Home Prices have been talked about a lot by economists and how important it was for the interest rates to remain low so that the housing market could recover. Well, the ugly truth is that the government listened and has been keeping interest rates artificially low to spur the economy along, but those days are numbered and that means that if interest rates rise there is a big question about home prices.
If interest rates rise will the housing market collapse? Will home prices go down further? How will this affect sellers, will we see more short sales? Will banks be more adaptable in negotiating with homeowners to keep them in their homes? Will we see 40 and 50 year mortgages proposed by the banks to lower payment amounts and keep homeowners invested in their homes? Along with this relationship is also the change in the population, with younger members willing to rent and have the flexibility to move quickly if they so desire rather than owning a home.
So many questions and so few answers. What we do know is that right now, interest rates are low for 30 year fixed rate loans. Yes, you do need better credit and some savings, but if you have been sensible now is a good time to buy a home as prices have declined. If you are selling, there are buyers looking for homes now before the market changes, so it is a good time to list your home as well. There is plenty of inventory to see, and many foreclosed and bank owned homes in the pipeline, although Chester County has very few defaults and distressed sales compared to other locations.
Another thing to remember is that even if interest rates rise there will still be buyers and sellers out there, so you will need to price accordingly to make your home the best value in the market, which is why prices most likely will drop further if interest rates rise and why the government along with encouraging job growth is paying to keep interest rates low right now.
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