How can rising rates affect the market?

A: Everyone asks about rates when they are initially consulting with their mortgage broker to finance a home purchase.

So far this year, we have already seen a .375 percent rise in rates, and interest rates are predicted to continue their rise steadily for the foreseeable future.

This news follows some major changes in our tax laws taking effect in 2018, governing how deductions for mortgage interest, state and local taxes can be taken.

The new tax law provisions are seemingly causing more concern than interest rate increases.

Once buyers are shown the difference in monthly payment between the former interest rate and the current higher rate, the difference is seen as affordable.

The larger concern for buyers is a market correction in home value, as a result of all of these changes.

Historically, we have seen that if you are buying to hold for at least five to seven years, the value of your home will return, even if prices decrease at some point.

Interest rate increases often motivate buyers to buy before rates go up additionally, and sellers to sell, before rates increase, potentially decreasing the pool of financially qualified buyers.

Although rates are expected to reach around 5 percent by the end of this year, our market remains very strong, still seeing a huge demand for quality housing and a limited supply of houses for sale.

Karen Starr, the Grubb Co., (510) 339-0400, ext. 224, starr@grubbco.com.

A: A hike in interest rates is no longer a rumor; it has indeed gone up from December 2017, which was averaging 3.78 percent to the current average of 4.62 percent. However, given our lack of housing and strong demand, it hasn’t affected the Bay Area market much.

As mortgage rates go up, buyers’ monthly payments are increased, thus decreasing their buying power. So it will drive out a few people, but rates would need to increase significantly for any serious impact.

If you’re spending $1 million on a home with a 20 percent down payment, here’s how your loan amount of $800,000 breaks down. Note: This scenario does not include property taxes or a one-time annual fee for home insurance policy.

3.78 percent rate in 2017 — $3,718 monthly payment.

4.62 percent rate now — $4,110 monthly payment.

Six percent potential — $4,796 monthly payment.

Seven percent potential — $5,322 monthly payment

As rates change on a daily basis, these figures will fluctuate. If you’re a two-income household paid handsomely, as many are in the Bay Area, you can see from this scenario that only a major hit to the wallet will have any drastic affect.

If our incredibly slim supply of homes continues, I don’t see how small rate hikes will any impact on our market. Par Hanji, Paragon Real Estate Group, (415) 307-5110, phanji@paragon-re.com.

A: For most of those buyers and sellers in Marin County whom we are working with, we have noticed little, if any, impact, from the rumors of increasing interest rates. And although the rates have in fact, risen, they do remain historically attractive.

What we are seeing is a continued sellers market, due to low inventory. The luxury market has slowed somewhat, but multiple offers are still prevalent on those well priced homes.

Economists predict higher rates this year and affordability may be in question later this year. For those on the fence about selling, it may be an opportune time while the pool of qualified buyers is still high.

Demand typically picks up in early February until late summer, which is good for both buyers and sellers, as there will be more properties on the market to choose from.

And inventory is projected to increase in the spring, giving buyers more opportunities to find their dream home.

Kathleen Daly, Coldwell Banker, (415) 925-3205, kdaly@cbnorcal.com; Lisa Lange, Coldwell Banker, (415) 464-3318, lisalange@coldwellbanker.com.