Rising mortgage rates may finally be forcing many hesitant buyers into the market. NAR's Pending Home Sales Index (PHSI), which is based on home purchase contracts, in May reached its highest level since late 2006. NAR also announced it was upgrading its price forecast for 2013.
It appears some of the rise in
contract signings could be from buyers wanting to take advantage of current mortgage interest rates before they move
higher. This implies a continuation of double-digit price increases from a year
earlier, with a strong push from pent-up demand.
Home prices are not going down any
time soon unless the economy or other fundamentals change the direction of the
market. Although interest rates are at a two-year high they still low in
comparison to previous years.
As inventory levels have dwindled over
the past year, the growing ranks of buyers have helped propel dramatic price
increases. As long as our inventory remains low and demand is high, interest
rates should not have a meaningful effect on the market especially given that a
significant number of offers in our area are cash offers. Multiple offers will continue to be the norm although
the total number of offers received on a listing could decrease.
For the first half of 2013, the median
sale price increased 25% for Palo Alto (from $1,726,000 in 2012 to a record
high of $2,150,000), 15% for Menlo Park (from $1,325,000 to $1,525,000), and 12.5%
in Atherton (from $3,200,000 to $3,600,000).
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