Massachusetts homebuyers, especially in the Greater Boston area, have seen real estate inventory decline for several years, and some real estate professionals believe rising mortgage interest rates may exacerbate the situation.
So what do rising interest rates for home loans have to do with Massachusetts real estate inventory? The theory is that homeowners who want to sell their home and buy a new one will think twice, if their mortgage interest rate is lower than rates at the time they consider selling. Some may decide to update or renovate their existing home rather than buy a new home with a higher interest rate.
Higher interest rates likely will make buying a home more expensive for first-time homebuyers, and the same is true for homeowners who sell their home and want to buy a new home. If rising interest rates do make buying a home more expensive, some homeowners might move up their plans to sell before the rates go even higher, offsetting the number of potential sellers that decide against selling their home and giving up their lower interest rate. Rising interest rates might also temper the recent rise in home prices, thus neutralizing the affect of rates on the real estate market.
There are many reasons to sell a home, so a slightly higher interest rate may or may not have an impact on a homeowner's decision. So far this year mortgage interest rates have remained below 4 percent. Many mortgage professionals and economists expect mortgage interest rates to remain below 4.875 percent in 2016.
It's hard to predict the real estate market. Few so-called experts predicted the housing crisis would last as long as it did, and others were calling for another 20- to 30-percent decline in prices at the bottom of the Boston area's market decline around the fourth quarter 2011.
Although economic factors certainly cannot be ignored, it's impossible to know and understand every motivation to sell or buy a home.