First American Chief Economist Mark Fleming was interviewed on CNBC earlier this week and discussed the housing market’s potential shift toward a buyer’s market and the challenges facing the market: affordability and interest rates.
“For the first-time home buyer, whether its 4 or 4.5 percent or even the expected 5 percent mortgage rates we might see next year, that’s still very, very low. There’s no real indication that rate changes of these low levels are really going to impact home buyer demand.”
Mark: We are beginning to see a transition from a very strong, historical sellers’ market for the last couple of years to something that’s more or an equilibrium, if you want to say that or moving towards a buyers’ market a little bit.
Brian: Mark, are there places that are perhaps tilted a little bit more, one way or the other? Regions that are showing some signs of at least being more of a buyers’ market or a sellers’ market.
Mark: The poster child at the moment, I think is a market like the San Francisco Bay Area. Its got high house prices, lack of affordability, lack of inventory, it’s difficult to build there. Those are really the challenges. If there was a challenge or a stress, I think, in that housing market today, it would be our inability to build more housing units to shelter everybody in the United States today.
Brian: Mark, another big stress is the fact that interest rates are on the rise. I remember buying my own house a couple years ago and things were much better then. How much is interest rate fluctuation going to affect the housing market?
Mark: Well it has really two affects: one is you, like many other home owners have this historically low mortgage rate who are disincentivized to sell or move. They want to keep that low rate but for the first-time buyer weather its 4 or 4.5 percent or even the expected 5 percent mortgage rates that we might see next year. That’s still very low and there is still no indication that rate changes of these low levels are really going to impact homebuyer demand.