The days of extremely low interest rates have ended, the Wall Street Journal and top housing industry economists agreed earlier this month, as home mortgage rates hit a two-and-a-half-year high. At Newport Cove, our waterfront development on the Chain O’ Lakes, these predications appear to be true; our model traffic is up, but our customers are being quoted higher interest rates.
Michael Fratantoni, chief economist of the Mortgage Bankers Association, said that the higher rates “are being driven by investor expectations that the U.S. economy is both likely to grow faster and have somewhat higher inflation over the next couple of years. That translates to higher rates.”
Despite this, the prognosis for the housing market remains good, reported the National Association of Realtors, predicting that the final tally of existing home sales for 2016 should reach 5.42 million (3.3 percent higher than in 2015 and the best year since 2006). The association has forecast that 2017 sales will grow an additional 2.1 percent, to 5.52 million.
Lawrence Yun, chief economist for the association, expects 30-year mortgage loan rates to hit 4.5 percent by the end of this year. “Historically, that’s a very favorable rate,” he explained. “We are getting back toward normalization, so this rate increase should NOT be alarming.”
He added that, while homebuyers might face higher monthly mortgage rates, at the current median home price, a typical buyer is looking at about a $70 per month difference.
The experts’ bottom line prediction is this: More homes will sell this year, and mortgage rates probably will increase, but not much.