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http://ochousingnews.com/blog/locked-low-mortgage-rates-will-dissuade-todays-homebuyers-selling-later/

Contrary to conventional wisdom, low mortgage interest rates locked-in by today’s buyers will not dissuade them from selling in the future.

Housing economists point to the specter of rising interest rates as a deterrent to future move-up home sales, reasoning that the higher cost of ownership will provide a strong disincentive for move-up buyers to list and sell their homes. The idea rests on a faulty hidden assumption: that house prices will be higher when mortgage rates rise. Further, the idea fails to consider the equity-building power of loan amortization. Homebuyers are unprepared for reality of rising interest rates, but so are housing economists.

Today’s buyers who are locking in low mortgage rates will set the prices in the move-up market five to seven years from now. If mortgage rates are higher, which seems likely, then the cost of ownership will also be higher. Unless we have significant wage growth, future buyers will not be able to bid as high, and home prices will be lower than most anticipate. (See: Higher prices and rising interest rates will slow housing market appreciation) Even if prices do manage to move higher, move-up buyers will still be able to participate because they will have more equity from the sale of their current home.

Assuming house price appreciation is tepid, the move-up price will not be much higher than current pricing. So where will the equity come from to make a move-up?

Amortization.

Source: http://ochousingnews.com/blog/locked-low-mortgage-rates-will-dissuade-todays-homebuyers-selling-later/#ixzz35BksOPJa

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