This past week I came across two separate indications about what may happen to the residential real estate market in southern New England, and elsewhere, in 2015.  The first was actual data that demonstrated that while sales were down in 2014 compared to 2013, the prices had risen close to 5%…and this is in Rhode Island, traditionally one of the “lagging indicators” of all states and historically one of the last to exit from economic downturns.  See the below:Median House Prices and Sales 2013-14

Rhode Island has been hit especially hard since the last downturn because the unemployment rate has been one  of the highest in the nation, and it has been ranked last by CNBC on several occasions for business attractiveness.  Next I read the predictions for interest rates from several different sources and they all indicated that rates are going up from .3% to 1.2% by the 2015 4Q.

Mortgage Rate Predictions 2015

So to extrapolate: In a “worst case scenario”, if the price of a house increases from $200,000 to $210,000 AND interest rates increase 1.2% (NAR) the monthly payment excluding taxes and insurance would increase from $948/mo today to $1,143/mo at the end of 2015.  That is an extra $2,340/year, $35,100 over 15 years, and a whopping, uncompounded,  $70,200 over 30 years.  Wouldn’t it be better to have that money in your retirement account, or use it for a vacation home?  Since we have been at historic lows for a few years, and prior to the downturn the “Fantastic Rates” were well over 5%, this is not that outlandish.  It is also not outlandish to think that we will not be returning to rates this low for generations since prior to 2010 we had never had rates in the 4% range (BankRate.com.)  So what do you think is now a good time to buy or sell a home???  If you have questions about buying or selling a home, email Joe@JoeLucaRealEstate.com or voice/text at 401-580-9797.