With all the talk of continued low interest rates, we’re asking the question: have low interest rates lost their impact on the housing market? Certainly in the first half of this year, even beginning in Q4 of last year, the name of the game was the low cost of financing. At that time, everyone was counting on inflation rearing its ugly head by Q3 of this year and pricing out wanna-be home owners by raising the cost of purchasing a property.
Lo and behold, the markets moved against conventional predictions, prodded by a European debt crisis and double-dip worries here in the US. We now find ourselves with old inflation expectations having been substituted by deflationary concerns, all of which have taken the sense of urgency out of the buy-side psychology. Yes, interest rates may well stay at such historically low rates for some time to come, but the previous positive impact felt in the housing market has been greatly diminished. We believe this is at least partly responsible for some of the transaction slow-down we’ve been hearing about: if buyers believe low rates will continue for some time, they can take it easy along their purchasing journey.
