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Rising Rate Concerns
I’ve seen that interest rates since last year have risen more than 1 percent. What has been the impact on real estate?
As this is written, mortgage rates are roughly in the 4.4 to 4.5 percent range, up from 3.35 percent at the end of 2012.
If mortgage rates were the only variable that impacted housing, then no doubt we would see lower prices and sluggish sales. However, interest rates are only one of the many factors that influence real estate activity.
Let's start with last year’s interest levels. They reached historic lows.
We now have rates that are higher than last year, but they are vastly lower than mortgage rates seen by most homebuyers during the past several decades. Standard & Poors reported in July that between 2002 and 2007, the average mortgage rate was 6.1 percent while over the past 40 years the typical loan was priced at 8.6 percent.
Every borrower wants the lowest rates possible. Today’s interest levels remain far below historic norms and are a bargain; just ask anyone who financed or refinanced a home before 2009.
And because there is always the possibility that rates could go higher, now might be a better time to get financing than a few months down the road.
What about sales and prices? The latest data from the National Association of Realtors shows that existing home sales in June were 1.2 percent lower than in May. The same figures also show that unit volume increased 15.2 percent since June 2012.
As for home prices, NAR says the national median existing-home price was $214,200 in June, up 13.5 percent from June 2012 – the sixteenth month in a row that prices increased year-over-year.
Why are both interest rates and home values rising? It could be because pent-up demand remains from the so-called “missing households” that did not buy during the past few years because of employment worries and financial uncertainty.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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