Home sellers fret as rates rise
MARIETTA, Ga. – A four-bedroom ranch home with a finished basement and swimming pool overlooking a golf course fairway in one of Georgia’s top school districts should be a steal for $309,000.
Not for owner Sherry Hersh, who blames rising interest rates for keeping her home on the market for nearly a year.
“It’s made it more difficult to sell it,” says Hersh, who runs a small promotional products company out of her suburban Atlanta home. “It’s made me more conscious of what I will get for the house in order to buy a new house.”
Real estate and mortgage experts from Los Angeles to Chicago to Atlanta say Hersh’s case could become more common in the wake of the Federal Reserve’s decision this week to increase the overnight bank lending rate for the seventh time since last June. Because that helped push up other interest rates – including the yield on the 10-year Treasury note, which tends to influence mortgage rates – they say it could take longer for people to sell their homes at the prices they want.
So far, though, signs of a slowing of the housing juggernaut are mostly anecdotal.
New-home sales soared by 9.4 percent in February, the government reported on Thursday. And while sales of previously owned homes dipped 0.4 percent last month, the results still were better than analysts were forecasting.
At the same time, the median price for new homes – where half sell for more and half sell for less – rose 5 percent from a year earlier to a record $230,700 in February. For existing homes, the median price was $191,000 last month, an 11 percent increase from the same month a year ago. And stories of bidding wars pushing sales prices far above their asking price continue to circulate in many markets, including New York City and the suburbs of Washington, D.C.
Even so, economists are forecasting that home sales and ever-escalating prices are likely to cool if mortgage rates continue to head higher this year. Rates on 30-year, fixed-rate mortgages rose this week for the sixth week in a row and now average just above 6 percent nationwide. A year ago they averaged 5.4 percent.
“What’s happening with rates is hurting the seller worse than it is the buyer, and home prices will flatten out if not go a little lower,” said Bob Long, president of the Georgia Association of Mortgage Brokers.
In California, some industry observers are projecting a gradual slowdown in prices as borrowing costs rise and affordability becomes an even more acute issue.
High-end homes in parts of Chicago, those priced at $1 million and up, aren’t selling as fast as they did in recent months, said Barbara Frankel-Abrams, vice president of sales at Jameson Realty Group.
“Maybe carrying a quarter percent increase (in interest) is more formidable at that price,” she said.
Sin City’s housing market has been hot during the period of low interest rates over the last several years. But some mortgage agents in Las Vegas believe that rising rates could start to put the brakes on their housing boom, making it more difficult for sellers.
Not everyone is predicting that ballooning home sale prices will burst with rising interest rates.
In Phoenix, the market has been so hot, it’s going to take a while for it to cool down, said Jay Butler, director of the Arizona Real Estate Center at Arizona State University.