One of the more creative analogies about our interconnected world describes how a leaf falling in one part of the world affects another part of the world. Economic actions do not differ.
Slow rising interest rates damper home purchases with many traditional home buying groups ‘stuck’ in a holding pattern, for now.
This effect on real estate comes as no surprise. However, its effect causes ‘potential’ buyers to remain in their existing homes. Occupied homes elude ‘first-time’ buyers, who face increasing prices. Perhaps the most significant reveal in this podcast argues that home ownership is more profitable than salaried employees in many markets!
On the other end of the home-buying spectrum are older families unable to downsize into smaller homes. They similarly wait until refinance rates make their sale and purchases more economical.
Finally, new home builders construct only townhomes as this segment of the market grows–at the expense of smaller and larger homes.
On the bright side, two ‘winners’ from this trend are: remodeling companies, and property managers with rental properties. Families ‘make due’ in smaller dwellings, with minor modifications. As mortgage companies tighten their lending standards, fewer people qualify for larger homes in nicer neighborhoods, resulting in a tighter leasing market in these areas.
From my vantage point, I’m seeing renters more willing to sign longer lease terms not being ‘as sensitive’ with modest rent increases. My hope remains that both renters and property managers come out ahead in this environment.
I would welcome any comments you have about this, or other blogs on this site.