A Realtor's Perspective on Reno – Lifestyle, Business, Family
Since the election, mortgage interest rates jumped 1/2 percent, according to a briefing this morning from one of our mortgage partners.
“Interest rates should increase gradually during the next four years under a Donald Trump administration, which could dampen growth in the housing industry, economists and housing experts predict,” according to The Street, an online economic blog.
It’s already happening. Rates offered to borrowers with excellent credit jumped to 4.25 percent for 30-year fixed-rate loan. That’s a real shock to consumers used to rates starting in the 3-percent range. The new numbers are low by historical standards — yet psychologically, it hurts.
It also cuts into consumers’ buying power. The lender I spoke with explained that a half percent adds about $44 per month to the payment on a $200,000 loan.
That may not sound exorbitant. Over time it adds up. And, it cuts buying power for many clients. Depending on their income and credit rating, every incremental increase in mortgage interest rates means they can afford less house.
Various economic websites are using “skyrocketing” “relentless move upwards” when talking about recent spikes in interest rates. Will rates continue to rise? I have no crystal ball. In one weekly report, 50% of economists said “yes” If that happens, buyers will afford less house.
How does that impact buyers? Higher interest rates mean higher monthly payments and it will take a higher income to qualify for the amount a consumer could get last week.
How does it impact sellers? By shrinking the buyer pool. Will it hurt list prices for homes? Not immediately. Logically a sustained increase in mortgage rates has to effect sellers.
What do you think? Let me know!