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The Impact of Rising Interest Rates on Properties for Sale by Owners

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By : John Cutts    99 or more times read
The rate of 30-year mortgage houses in the US have increased from 5 to 5.3 percent in the first week of April driving prospective buyers to quickly close deals on properties for sale by owners. Market watchers see this increase as a real threat to the delicate uptrend in housing markets.

Homeowners looking to take advantage of the very low rate and a good loan structure might have to wait for the next wave of decline as the deals available now are reserved only for loan packages that reset in a shorter time and possibly at higher interest rates.

Properties for sale by owners might be in a good position to be sold at the moment with buyers pushing for a sale under these ideal rates before they get any higher. In fact there is some sense of panic among house prospectors as they watch the rates go up thinking they should have bought something a week or two ago.

The home buying game all boils down to affordability. A national Association of Realtors research indicates that in any given year, a single percentage point increase in rates would price out around 300,000 prospective buyers reducing their purchasing power by roughly 10 percent. This situation does not bode well for a market filled with properties for sale by owner.

The increase in mortgage rates is influenced by the declining interest of investors in government debt opting to put their money on corporate stocks and bonds. The government’s decision to end its program of buying securities backed by mortgage also pushed the rates up. Increasing home prices would not cause demand to abate as homeowners would try to make do with higher mortgage rates knowing that the value of their homes will appreciate in the long run.

Homebuyers may be wary purchasing properties for sale by owner if this state of flat or falling home prices and rising mortgage rates continues. Brokers have their work cut out for them during this time, and that is to facilitate home sales by convincing buyers that the overall improvement of the US economy would be able to absorb their imagined future losses or would actually turn the housing market around back to declining mortgage rates.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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