Interest Rates on the Rise Again, Impacting Home Sales

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Michael Guthrie Michael Guthrie
Jay Domenic Jay Domenic

People shopping for homes often hear from realtors and mortgage loan officers that now is the time to buy, but they might be right this time.

Interest rates are on the rise again after being a steady 3 percent for the past few years.

Those rates by next year are expected to be closer to 5.5 percent.

Realty experts say that the economy is doing really well right now, and that usually means bad news for interest rates. It's because lenders feel like they can charge more to borrow if the market is doing well enough to handle it.

And it is.

There are more buyers than houses. That's helping to balance the market right now with increasing rates - there are still enough people that want to buy they'll just have to pay more.

There's also another factor that's pushing those rates up, the federal government wanting to take a step back from the housing market.

“The government subsidizes Fannie Mae, Freddie Mac, and keeps the interest rate down so that people are able to purchase a home. The government is trying to get out of that, and it’s like a jack-in-the-box. So if you move your hand the rates have to go up,” said Roy Wheeler Realty CEO Michael Guthrie.

“A lot of people have misconceptions about how the interest rates move and why they move. They tie everything to the [federal government]. When the fed raises the interest rates… the fed doesn't control the mortgage interest rates, the market controls those,” Movement Mortgage Loan Officer Jay Domenic said.

It's investors that make the decision to drive up rates. Some housing experts expect a housing recession by 2020, not because of the economy, but because of skyrocketing interest rates.

Builders for new homes are rolling out locked-in loan packages now. That's to give potential buyers more assurance since now there are a lot of people not wanting to buy without knowing where rates will be in a few months.