Sellers never I repeat NEVER keep up with market conditions. Sellers only REACT to market conditions. Actually the article is exactly correct in the sense that initially when rates do rise, buyers do effectively pay more for a home. However, my thoughts are that yes, rising rates will indeed push housing down.
Look at a 500k loan at a 30 year amortized payment period:
6% 2997
7% 3326
8% 3668
As you can see your montly payment increases about 10% with each 1 point rise in the rate. (FOR THIS PARTICULAR LOAN AMOUNT)
A 450k loan at a 30 year amortized payment period is:
7% 2992
8% 3301
9% 3620
Now your carrying costs for the home are cheaper because you property tax is indeed lower. Also by waiting to purchase you should be saving money for the downpayment which hopefully combined with the reduction in the overall market prices will help you match the effective monthly payment. Subsequently you will have more equity in the home if you HAVE A HEALTHY DOWNPAYMENT. My belief is that sellers usually lag market conditions at first by a wide margin but then catch up as the overall market psyche is well realized.
Right now we are still in a period of major denial by alot of sellers. Not as much denial as last your and way less then 06. Yet more denial then there will be in 09, 10, and 11. It doesn’t matter if it is rising rates, rising inventory, or anything else, the sellers will react but it just takes awhile.
As previously discussed. Rising rates substantially (I mean bigtime substantially) help those who have large cash reserves. Those who do not have large reserves when we are at 9% 10% and in the teens like in the 80s respectively are pretty much sol.
