A research note from two economists at Goldman Sachs, the elite Wall Street investment firm, project that housing prices in the United States will continue to rise, even with higher mortgage rates.  The two Goldman Sachs economists, Hui Shan and Marty Young, expect housing prices to increase by 4-5% over the next several years.

 According to the research of Young and Shan, at a 30-year fixed mortgage rate of about 3.8 percent, the average American family can afford a $279,000 house.  That is almost 50 percent more than the average house costs.  Based on their findings, mortgage rates could go to 6% before home buying began to decline.

That is very bullish news for real estate investing.

Recent mortgage rate increases have had many worried about the housing rebound in the United States starting to lose its momentum.  But the research from Hui and Young evince that there is still a great deal of buying power in the American family when it comes to purchasing a home.

This is more good news that follows greatly improved confidence from American home builders, increased attendance at trade shows for the housing industry, and booming sales with soaring housing prices across the United States.  As covered in another piece, home builder sentiment is at a 7-year high, based on a survey from the National Association of Home Builders!

As Shan and Young wrote, which should come as little surprise to those following the rebound in real estate in the United States, higher interest rates, "will likely slow the strong house appreciation observed of the past year, but the impact will likely be modest given the cushion provided by the level of housing affordability at present."  That is due to the overwhelming demand that has been burgeoning over The Great Recession, when many Americans were too worried about the future to take on the responsibility of home ownership with a 30-year mortgage.  Now more and more are hitting the bricks to find that ideal property, whether it is for a home, vacation place, or investment property to bring in rental income.

On the front lines of the revitalized real estate market in the United States, Jerry Cohen, President and Founder of EquityBuild, a real estate investment firm, observed that, "A bump in mortgage rates will not stop the housing market its roars back from The Great Recession.  There is too much demand, which is the most important feature in any economic market.  Housing prices should continue to rise, which is good news for home owners and real estate investors."  For those looking to buy, Cohen counseled, "Don't worry, as there are many good deals to found.  But there is a lot of competition from other individual home buyers and institutional investors like hedge funds and private equity groups."

 

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