Will an Interest Rate Increase Affect Park City Real Estate Inventory?

Interest rate increase for mortgages has been an especially hot topic since they reached historic lows a few years ago. This drop was initiated by the Federal Reserve following the recent global recession to support the recovery of the economy and housing market. But with recent indicators pointing to an improving economy, experts have have started to talk about mortgage rates climbing. They predict that we will be back above 5% sometime next year. In theory an increase in interest rates could affect Park City Real Estate Inventory

The effects of an interest rate increase for mortgages are numerous, including a decrease in real estate inventory. In localities such as the Park City where inventory is already “scarce”, even a slight change can have a large effect on the market. A recent article in the Wall Street Journal explains why this decrease in inventory would occur through a phenomenon known as the lockdown effect. It states that if rates go up homeowners who have rates below 4% would be less likely to sell, knowing they would be forced into a mortgage with significantly higher interest. Although this effect would be mild if the rates increase slightly, a return to rates from the 1990s or early 2000s may cause substantial decreases in sales volume.

While the low rates we are experiencing may not disappear tomorrow, they will go up as the economy continues to recover. Given the uncertainty of the timeline on an increase in rates and the historic lows that we are witnessing, if you are in a position to act, now is an excellent time to buy.

To learn more about available properties and sales trends in the greater Park City area, don’t hesitate to contact me.