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?
