Mortgage interest rates
First, let’s put rising mortgage rates in perspective. If mortgage rates continue to increase in 2014, it’s not a sure sign that home buyers will be discouraged. By past standards, interest rates will still be considered low, even at the 5½ percent predicted by the National Association of Realtors. Any increase in mortgage rates are coming off the historically low 3.52 percent in spring of 2013. When you consider that homeowners were paying mortgage rates between 7 – 8 percent in the 1990s and 10 – 12 percent in the 1980s, 5½ percent looks like a bargain!
Second, a projected rise in mortgage rates is not expected to negatively impact all homebuyers. According to the Mortgage Bankers Association, home sales are predicted to increase 10 percent nationally in 2014. Some first time homebuyers might be discouraged by rising interest rates, since a 1 percent increase in rates equates to about a 10 percent rise in monthly payments. For the most part, buyers who meet the current, more strict lending standards should still be able to afford to own. When you consider the rising cost of renting, it may be difficult to pass up the opportunity to own a home.
Third, there is a compelling argument that the principal effect of rising interest rates is more likely to negatively impact the refinancing of mortgages than home sales. The Mortgage Bankers Association predicts refinancing demand will drop by half in 2014. Fortunately many homeowners already took advantage of the historically low mortgage rates or have locked a lower rate as they go through the refinancing process.
Given the healthier economy and improved unemployment numbers, the outlook for the local housing market in 2014 has reason to look positive.
