Rising rates could (eventually) slow home sales
Jul 21, 2015 at 12:58 PM
Key economic indicators due out this week could determine the destiny of decimal points.
“This week is kind of the telltale week to determine what's going to happen in the future,” said Dale Zahn, CEO of the West Michigan Lakeshore Association of Realtors.
If the numbers are promising and the economy is improving, interest rates likely will continue to bump up, according to Zahn.
Despite a percentage point increase in the past few months, Zahn said housing markets in Grand Haven, Spring Lake and Ferrysburg are still singing strong — to the tune of 458 closings from Jan. 1 through Monday.
“It means there's some confidence coming back in the marketplace,” he said. “Rates that stayed remarkably low for so long finally caught on.”
Zahn said he received word Monday from a local lending source that rates were up to 4.75 percent. But he said the rate bump is actually encouraging news for Realtors.
“Historically when that happens, it puts a fire under buyers who are procrastinating," Zahn explained. "Rather than wait for rates to go down, they're concerned they will go up. It's worked that way for all the decades I've been in this business.”
It appears to be happening again. Instead of scaring off would-be buyers, the interest rate bump has motivated many to take the purchase plunge.
“I think, if anything, it may be an alert to people who may have been on the fence about buying,” said Jack Bauman, regional manager of the Coldwell Banker Woodland Schmidt real estate firm. “This may trigger people to make a decision before those interest rates go even higher.”
Mortgage interest rates nationally have jumped from 3.41 percent in January to 4.37 in July, according to the Federal Home Loan Mortgage Corp., known as Freddie Mac, a public government-sponsored enterprise.
Despite the uptick, Bauman said rates are still comparatively low.
“The rate that exists in the market today is still historically low by comparison to any marketplace we've been in in our lifetime,” he said. “It remains an incredibly attractive rate. I don't see where rates this low are going to have a significant impact on our local economy.”
But Bauman noted that it may make a difference in what people can afford. The point increase may mean that someone who could afford a $120,000 home a few months ago can only purchase a $100,000 property today.
“It doesn't take them out of the market, but it does have some effect on the affordability factor,” Bauman said.
Steve Matthies, broker/owner of the ReMax Lakeshore office in Grand Haven, said he expects short-term improvement, but a potential long-term drag if rates continue to climb.
“The people that were sitting on the fence will make a decision,” he said. “But I think, in the long run, raising interest rates hold housing prices down and they slow the market.”
To read more of this story, see today’s print or e-edition of the Grand Haven Tribune.