By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

If you know enough about a market and you start to really pay attention to the news coverage, you eventually run into stories that either grossly overestimate the impact of a financial indicator or raise questions that, at their core, seem off base.

The latest such story for real estate is over rising interest rates.

Last week, Freddie Mac said in its weekly report on rates that the average rate for the 30-year mortgage rose to 3.81% from 3.59% the previous week. On the surface, this does seem like a jarring jump since rates tend to move very incrementally. But in context, this is still not far from the 3.31% rate in November, the lowest on record since 1971.

But it was enough to set off a flurry of headlines like this:

Rising Mortgage Rates Could Dissuade New Home Buyers
Mortgage Rates Surge Higher, Effect on Housing Recovery Uncertain

Here’s a little reality check, though:

Yes, rates have increased in recent weeks. Yes, this means that the refinance boom most likely will wither away very soon. Yes, this also means that some buyers may get priced out.

But this is not the end of the recovery, folks. Not even close. In fact, a blip in rates tends to create more urgency among fence sitters, creating a mini-surge in sales. (Of course, we have no idea whether this is the case right now. But we’ll see in future monthly sales reports.)

It must be said, too, that while interest rates are a very important component of a home buyer’s considerations, they are not the end-all-be-all decision maker for the majority of folks looking to buy.

This is because most people buy a home for a reason. It’s either out of necessity because they’re relocating or their family is growing or they need to be closer to work or school. Or it’s out of a desire to get into ownership and start building their financial future.

All of these reasons trump a .22% rise in rates – no matter how much they could’ve saved by buying sooner.

A small rise in interest rates may not be a welcome thing, but it’s not going to send buyers running for the hills in herds. It may have the opposite effect. What really sends buyers running are sharp decreases in sales and values, and job loss.

Thankfully, we aren’t seeing much of that across the U.S. right now.

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