Mortgage Rates Hit Highest Since 2014 — Houston Realtors Respond
Danielle Hale
HOUSTON – (By Michelle Leigh Smith for Realty News Report) – Mortgage rates have risen to their highest levels since 2014, raising concerns for buyers who already face rising home prices and limited inventory.
Freddie Mac reported that the 30-year fixed-rate mortgage averaged 4.47 percent for the week ending April 19, up from 3.97 percent at the same time last year.
“Rates are now at their highest level since early 2014,” said Danielle Hale, chief economist for realtor.com, based in California. “Rate increases are expected for much of 2018, with the 30-year fixed rate mortgage expected to approach 5 percent by the end of the year. These increasing rates will be an added challenge to home shoppers in what is already, perhaps, the toughest home-buying market in recorded history.”
“I am seeing it slowly impact the market now — as rates rise, sellers are less likely to list and many choose to remain in their homes, which reduces inventory,” said Iris Hale, a loan officer and mortgage advisor with Homebridge Financial Services in Houston. “Less inventory tends to push prices up, and buyers will often shift toward lower-priced or smaller homes to remain qualified.”
According to the Houston Association of Realtors, the city’s average home price in March was $292,756, a 3 percent increase from March of last year.
“There’s a big difference between 3.75 percent and 4.5 percent and higher,” said Trey Wolff, a senior loan officer with Certainty Home Loans in Houston. “On a $200,000 loan, depending on the program, that difference can be about $150 a month — roughly $1,800 a year for a family. During a previous heightened market, 30-year rates reached about 5.85 percent. Now a new wave of millennials are buying, and I believe we could see rates in the 5 percent range by year-end.”
Freddie Mac notes that rates fell as low as 3.35 percent in 2012; historically, the peak was more than 18 percent in 1981.
“Although rates are the highest since 2014, they remain relatively low by historical standards,” said Trish Figueroa with eXp Realty in Houston. “For perspective, in June 2000 rates were 8.54 percent. Our records also indicate that 5 percent is possible by the end of the year.”
The national average for a 15-year fixed-rate mortgage was 3.94 percent last week.
“I hope interest rates don’t rise too quickly,” said Cheryl Israel, Realtor, CNE, with Keller Williams Memorial. “Buyers and sellers need time to adjust, and rapid increases could put downward pressure on home prices.”
“If buyers see rates climb, there may be a rush to make decisions sooner; but if rates rise above 6 percent, expect search activity to slow,” said Neal Hamil, president of Carnan Properties. “At present, there’s no clear evidence of a market rush. Complacency after the threat of higher rates has given many a sense of security. It remains to be seen whether this will meaningfully affect the market. When shifts occur, it typically takes several months to show up in Houston home sales.”
Houston home sales were slightly softer in March, though many local professionals attribute the dip to factors other than mortgage rates.
“I am not seeing interest rates negatively influence the market,” said Charles Goforth, a Realtor with Heritage. “If anything, expectations of rising rates may be prompting fence-sitters to act. Financial market volatility and low inventory seem to have a larger impact on the local housing market. Ultimately, many buyers will need to adjust expectations to match their budgets.”
Rising rates can also motivate hesitant buyers to move forward with purchases to lock in lower financing costs.
“I have not seen any negative impact from rising rates so far,” said Roger Martin of Roger Martin Properties, who recently sold the most expensive home to date in West University Place. “Sometimes rising rates can boost activity, as buyers try to lock in current rates. It can be counterintuitive.”
How high is too high? At what point would rising rates push Houston’s strong housing market into a slowdown?
“Eight percent,” said retired rancher and banker Jerry Ritcheson of Houston.
