Despite the recent jump in mortgage rates, housing economists still expect the real estate sector to continue rising, according to an article in The Wall Street Journal by Nick Timiraos and Conor Dougherty.  The Journal piece, “Mortgage Rates Shoot Up, but Still a Bargain,” said it all with its headline!

 Over the last five weeks, mortgage rates rose from 3.59% to 4.15% for a 30-year loan, according to the Mortgage Bankers Association.  That was the first time all year that mortgage rates crossed the 4% mark.  For the media priced home in the United States of $198,500, that is a $50 increase in the monthly payment.

Even with that increase in the monthly nut, the housing market in the United States continues to surge.  

Not only are homebuyers jumping back in, so are real estate investors.  Those buying properties to profit from high yield real estate investing by renting out the units range from individuals in the United States to foreign investors, as detailed in another article on this site.  Hedge funds, pension equity groups, and other institutional investors have also been plowing billions into the American housing market.

"There are too many good buys in real estate in Chicago and other areas in the United States for such a small increase in rates to slow down the momentum in the housing sector," observed Jerry Cohen, President and Founder of EquityBuild, a real estate investment firm.  Cohen, who has participated as a principal in more than 2000 real estate transactions since 1984, also noted that, "Not only is there outstanding value in this market, there are so many ways to profit from real estate such as turnkey properties, small apartment buildings, and private mortgage notes that all investors should be able to find a suitable way to buy and profit later."

Cohen's bullish outlook is confirmed by an analysis from Goldman Sachs' economists that was cited in Timiraos and Dougherty's article in The Wall Street Journal.  The report from Goldman Sachs, even with the recent rise in mortgage rates, still projects a 4-5 percent rise in home prices in the United States "over the next few years."  It was also stated by the report that housing prices in the United States will be affordable  for mortgage rates all the way up to 6%, almost a 50% increase from the present level for 30-year loans.

It was also reported by Dougherty and Timiraos that the greatest threat to affordability is not high mortgage rates, but a low inventory of homes for sale in the United States.  As stated in the article, "The bigger concern for housing buyers is that the supply of homes for sale is low, and that is pushing prices out of their range."

 

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