Everyone is very concerned about the debt rating downgrade right now. However, the economy is the main driver for current housing market conditions.
Greg McBridge, senior financial analyst at Bankrate.com, says that “as long as the economy continues to limp along, interest rates will not increase.” This is great news for those people who are ready to purchase a home, have a strong credit history, and are looking for a low mortgage rate. Currently rates are in the mid-4% range, which is a historic low. Short term rates fell since the S&P credit downgrade to 50 year lows.
With unemployment rates above 9% and the current weak job growth, many households, especially younger households, are unwilling to pull the trigger and make a move. These conditions are one of the reasons that home sales fell unexpectedly in June. Fears about job security, tougher borrower requirements from banks, and overreaction to the wild stock market swings of the past few days are other factors that have kept some Buyers on the sidelines.
One consideration many experts fail to mention is the seasonal nature of the real estate business. Each year, there is a documented slow down in sales during July and August in the Great Philadelphia area. Buyers are beginning to prepare for the fall purchases we see every year, with the goal of being in a home by the end of 2011. A much more accurate assessment of the real estate market can be made then, as opposed to now when there is a historical trend that sales slow.