Over the last few years we have seen bidding wars become common place as more buyers than sellers exists. This disparity has, for the most part, been due in part to the ultra low interest rates we have enjoyed for the last 3+ years. Last year the government changed the lending rules to make it more difficult for marginal borrowers to get mortgages. This move had several targets and one was to cool the market while the other was to protect buyers so that when rates did move up, they would not have to sell their homes in a panic, causing prices to drop (crash).
The word is out and the US economy is recovering and as a result expect to see mortgate rates move up. Plan to see them move up suddenly as better news comes out and of course as lenders take advantage to boost rates (bottom line). You can read the details here but suffice it to say these changes will have several impacts to the housing market:
- Buyers will be competing with each other once again as they race to get their home buying complete before the rates bump up, ensuring they are locked in for the lowest rates possible, for the longest terms possible.
- Sellers will scramble to get their homes to market to cash in on this frenzy as well as become buyers themselves.
- Once the rates increase marginal borrowers will find themselves on the outside as prices increases and rate increases will have squeezed them out of the market.
- Investors who own homes/condo's for rent will see an increase in the pool of renters who can no longer afford to buy. (rent rates have already moved up 4% in the downtown core).
Over all expect to see higher prices and higher borrowing costs. My advice, prepare now to accelerate your moving plans or pay the price...literally!