Housing, holidays, and interest rates are an intriguing concoction when it comes to the mortgage industry. Consumers, who are caught up in the excitement of the holidays while in the process of purchasing a home, may neglect to consider the effect the season may have on the mortgage industry’s ever-changing interest rates.
So, what are the effects of this concoction, and how do they affect home buyers in today’s market?
As people wait for the Fed’s next move, speculation about a change in housing interest rates lingers. CNBC reported in December of 2016, that “mortgage rates [were] sitting solidly at the highest level in two years, and could move even higher…”.
But, CNBC goes on to report that perhaps interest rates don’t affect housing as much as we thought they did. CNBC states that “…there is great debate over whether rising rates really matter to housing. After all, increasing rates are indicative of a stronger economy, and a stronger economy favors housing.”
Chief economist at Fannie Mae, Doug Duncan, told National Mortgage News that, “…[if] interest rates are rising because the economy is growing more rapidly, then, typically, incomes also rise, and the rise in incomes offset the increase in the size of the mortgage payment, and housing goes just fine.”
But if the Fed’s decisions increase the benchmark interest rate, wouldn’t it affect housing affordability?
Berkshire Hathaway HomeServices, a real estate brokerage, released a report and survey, showing the increased number of home buyers and owners who would feel anxious if rates were to continue to rise. Stephen Phillips, president of Berkshire Hathaway HomeServices said, “Mortgage rates remain near historic lows, although it may not seem that way to recent, first-time buyers and those considering a home purchase.”
Zillow, a property listing and analytics company, “surveyed consumer housing trends and found that buying a home is less tied to current mortgage rates and more closely linked to a consumer’s financial well-being. Life events, such as job changes, promotions or change in the number of people in the household are the precipitating factors for a purchase.”