5% mortgage rate...affecting your local market, yet?

[Ben Lin]

Have you guys seen a slow down (i.e., price cuts, a lot longer DOM) in your local market now rate is at 5%? If yes where is your local market? Most markets still have supply and demand issue, but what will happen when mortgage rate hits 7 - 8%?

Thoughts? 

[Marcus Auerbach]

As of this weekend's round - no. Offers written: we lost 2 offers and scored on 2, which is an amazing success. The ones we lost had 14 and 51 (no joke!) offers, the 2 we scored had 24 and 15 offers. My listing went under contract with 9 offers.

So far it's only a $300 hit for our average buyer, that's a bummer but not a show stopper. At some point this has to slow down, but it is a long way from getting 15-20 offers down to getting 3-5 offers, which is long before getting down to 1-2 offers on the first weekend.

What we need to stop price appreciation is for the multiple offers to stop. Then offers will come in at list price. At that point the price appreciation will be driven still by the seller's through a steady increase of their list prices - but that is way less powerfull as these 15 offer competitions that drive prices 10-15% over asking. And then inventory will start to rise, which eventually means prices will start to level off (not to go down!).

Historically speaking (last 60 years) rising rates never had the power to crash a market. And we have seen rates in the teens in the 80s! If someone wants to buy a house for their family they will find a way, rates are what they are. They may have to settle for a smaller house, partents may have to chip in and they have gained massive equity and will be able to do so..

Home prices in Milwaukee has "only" gone up 12% last year, minus 8% inflation that's a very modest 4%, so as much as I am looking for indications, it does not seem this trend will change anytime soon.