When Costa Mesa Mortgage Rates Rise, Do Prices Fall, Too?
Most people know the answer to a question like, “Will home sales suffer if mortgage rates go up?” The answer is, “DUH! Of course—it’s sure to cut down on sales.” Even though that’s hard to argue with, the obvious cause-and-effect connection can be seriously misleading. It can even lead to an expensive mistake.
Everyone acknowledges that the effect of rising Costa Mesa mortgage rates will be to discourage potential buyers—especially for the 42% of U.S. buyers who depend on a home loan. When that payment goes up a lot, it happens that much more. Duh.
Yet for homeowners mulling over the idea of adding their own property to the Costa Mesa listings, that particular ‘duh’ can lead to a secondary conclusion that could be misplaced—namely, “If fewer buyers can afford a given house, the price that house can sell for will go down.” Instead of another “DUH, of course!” the answer to that one turns out to be “Not necessarily.”
That’s the finding published by government-sponsored Freddie Mac in its landmark Insight Report, “Nowhere to go but up? How increasing mortgage rates could affect housing.” It’s a long-winded collection of sales statistics tracking mortgage rate rises since 1990. The rate hikes caused sales levels to fall, of course—but not the prices paid for homes! The reason behind this seemingly perplexing fact is simple. In Freddie’s words:
“While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions.”
Sellers are fewer when their purchase of a new home would result in a more costly mortgage. Since a lower supply increases prices, presto!—like magic, the result is a graph that reveals what happened historically to home prices “the last six times mortgage rates rose:” +3%. +2%; +13%; +13%; +7%; and +11%!
The historical record points to a price impact on potential Costa Mesa sellers that is anything but dire. For would-be sellers, a first reaction to news of Costa Mesa mortgage rate increases may be worth a second thought. We’ll stand by to discuss what the current Costa Mesa market is showing. Why not give us a call?
We are built on a philosophy of Heritage & Hustle. The L3 is a full service real estate agency with a regional office located in the heart of #CostaMesa, offering a wide-array of custom services to meet their clients’ needs with roots in the community since 1976. It’s L3 mission is to provide trusted, convenient, responsive service to ensure clients enjoy their real estate experience. The L3 was originally formed to offer personal, concierge-level service as an alternative to the large, nationally based real estate companies. From its small beginnings of only two employees, The L3 has grown to a full staff of 25 serving over 300 clients a year. The L3 is not limited to serving just its clients; it is also committed to serving the community. Not only has The L3 donated hundreds of hours to many area charities, they have also received the prestige of being named one of the #toprealestatecompaniesinCostaMesa If you’re interested in #buyingorsellinginOrangeCounty, turn to the experts. Turn to The L3 and let them help you make your real estate buying or selling dreams come true. For more information or to get started on finding or selling your home contact The L3 today at 714-444-4663 or email us at email@example.com