– Shows that psychology trumps interest rates in the housing market – E24

Seasonally adjusted home prices rose 0.7 percent in February. This surprised economists E24 spoke to.

Home prices ended February up 1.4 percent. Seasonally adjusted growth ended at 0.7 percent.

Handelsbanken had previously expected seasonally adjusted growth of 0.3 percent.

– It is very strong. And it's a wonderful start to the year. We have to remember that price growth was also exceptionally high in January, so this is an unusually strong price increase, says Handelsbanken's senior economist Sarah Mitgard.

– This shows that psychology drives higher interest rates when it comes to the housing market, he adds.

Handelsbanken now sees increased confidence in the housing market, he wrote in a statement before the figures were released on Tuesday. This is because they see that many people are now looking to buy a new home before selling their own.

– We are now seeing more people buying homes (transactions) in the inventory indicator compared to the number of homes being put up for sale. As a result, the number of unsold homes also fell and remained at normal levels in January, they wrote in the report.

– Norges can use bank hours

For the second month in a row, house prices beat Norges Bank's forecasts. Norges Bank had expected a seasonally adjusted 0.2 percent fall in February — nearly a percentage point below estimates.

– Will the interest rate increase now?

– No, I don't think so, replied Gersti Haagland, Chief Economist at TNP.

– We wouldn't say house prices affect Norges Bank much from meeting to meeting. High house price increases, in isolation, would make Norges Bank unwilling to raise interest rates, says Haugland.

He says figures from Eiendom Norge on Tuesday show there is a strong demand side and households are likely to withstand higher interest rate pressure.

– It does not create the impression of a household sector struggling under the burden of high interest rates. For now, this suggests Norges Bank can take its time and be patient, Haugland concludes.

– Lowers the shoulders

Akershus Eiendom's chief economist, Kari Due-Andresen, tells E24 that households are now confident that interest rates will not be higher.

– We see families now shrugging their shoulders. They see that interest rates won't be high, so it's easy to calculate what you can afford, De-Andresen tells E24.

However, he recalls that seasonally adjusted growth of 0.7 percent was higher than Norges Bank's forecasts.

– Interest rate not biting?

– Yes, it's a weaker market than when interest rates were so low. Those who would normally have bought new may appear to have bought on the second-hand housing market instead.

– Making a “conspiracy” is not so easy

Randy Marjama, Nordea's head of individual markets, says you can now see confidence returning to the housing market.

– We are seeing an increasing number of applications for funding certificates. Marjama writes in a press release that because we had more signing meetings in February than usual in the past six months, there were also more customers actually buying homes.

He also writes that more customers want to “buy” again.

– Marjama says house-hunting clients are again in the market with high bidders and interested parties, and “bargaining” isn't that easy.

– A cocktail

Executive Director of the Norwegian Association of Estate Agents Carl O. Keeving said data released on Tuesday suggested that consumers are more confident in the housing market.

He says underlying housing demand is strong after two years of high population growth and low home construction.

But he sees bigger challenges for homebuyers in the coming years.

– Forecasts indicate that we will get a cocktail of real wage growth, significant interest rate cuts, population growth and a housing shortage over the next two years, which will trigger a strong rise in prices, Geving says.