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Rising interest rates to strangle housing market to death

If you don’t think higher interest rates are not going to impact the Boston condo for sale market, think again…

Boston condos for sale

Updated: Boston Real Estate Blog 2022

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Boston condos for sale
Boston condos

Okay, a bit extreme, right?

The National Assocation of Realtors has come out with its March, 2006 Forecast, and things look okay, if not great (at least for sellers).

The national median existing-home price for all housing types is projected to rise 5.8 percent in 2006 to $220,300. The median new-home price should increase 5.4 percent this year to $250,200.

Existing-home sales are expected to fall 5.7 percent to 6.67 million in 2006 from the record 7.08 million last year. At the same time, new-home sales are forecast to decline 7.7 percent to 1.18 million from a record 1.28 million in 2005 – each sector would be at the third highest year following the tallies for 2005 and 2004. Housing starts are likely to total 1.98 million this year, down 4.3 percent from 2.06 million in 2005.

Regarding the overall economy, things don’t look so hot, for the rest of us:

The 30-year fixed-rate mortgage should increase gradually to 6.9 percent in the fourth quarter.

Inflation as measured by the Consumer Price Index is projected at 3.3 percent this year. Inflation-adjusted disposable personal income is expected to grow 3.7 percent in 2006.

Growth in the U.S. gross domestic product is forecast at 3.5 percent in 2006, while the unemployment rate is seen to average 4.8 percent this year.

So, basically, the increase in inflation will wipe out any gains in GDP.

Regarding the real estate market, prices will still rise (but, why???) yet the number of sales will stall, or fall.

Source: Housing Market Readjusting To Normal Balance – National Association of Realtors, by way of The Walk-Through (The New York Times)

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Updated: January 2018

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