National Housing Market Outlook

Rising Rates Are Great for Housing

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John Burns

June 26, 2013

We are happy to see rising mortgage rates because we believe a stable housing market is a better long-term goal than a booming and busting market, and the housing market has been booming! On June 3, I addressed this on Fox Business News. Some of my comments were:

  • • Appreciation rates“We have a lot of home price appreciation going on, and if the Fed keeps rates where they are, we are going to see a lot more.”
  • Investors are flipping homes again“It is such an almost obvious bet at this point that everyone is piling in…We are seeing flippers now in the market…You only need to own the home for a couple of months to make a profit.”
  • Tremendous Fed stimulus“3.5-4% interest rates will cause rising home prices everywhere, and at some point…affordability is going to get out of whack, and that is when you want to get out.”
  • No bubble…yet“I don’t think we are in a housing bubble yet because prices are not out of line in relation to incomes, but I think it is time to start the conversation to make sure we don’t end up in another one.”

Here are some additional anecdotes:

  • 20% appreciation: New home prices have risen 20%+/- in the SF Bay Area in the last year.
  • Record high land prices: Finished lot prices are at all-time highs in good locations in Phoenix, Orlando, and all 4 major markets in Texas.
  • Bullish stocks: Wall Street is so optimistic about future home price appreciation that:
    • Some home builder stocks are back to 2005 levels.
    • Almost every stock sector remotely tied to housing is up 100% from 2 years ago.
    • There have been 3 home builder IPOs and 4 additional IPO announcements already this year, which is more than the last 20 years combined.

I realize that rising mortgage rates aren’t the best scenario for everyone, but slowing the acceleration in the housing market is in the best long-term interest of the country because it is really difficult to avoid overshooting to the upside. Also, can you really complain about a 4.5% mortgage rate?

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John Burns
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As CEO, John grows, leads, and supports a team of passionate, articulate, likable, and smart experts. Together, we solve today so our clients can navigate to tomorrow.

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