Have you noticed how mortgage interest rates are rising? The 30-year fixed rate moved up up to 4.38% last week. Many are wondering how might this affect the Tampa Bay real estate housing recovery.
The home price index published by Case Shiller went up more than 12.1% nationally during the past year. Some real estate markets like Tampa Bay waterfront communities have had much more impressive gains, but the question before us now is - will rising interest rates kill off recent advances in home and condo sales and prices or will it have little or no effect here in Tampa Bay.
A driving force driving the housing recovery all across the United States has been "investors; people both foreign and domestic who have bought homes by the dozen (sometimes by the hundreds) at bargain prices planning to either hold onto them as rental properties or to hold them for a while and them "flip" them when prices rise further. In some cases, these investors have essentially walked into small towns and offered to buy every property on the market at a certain discount from their listing prices. Obviously, there is a limit to the number of such investors ready to toss millions into the market. Further, as prices are driven up by their practice, the number of opportunities to make a "quick buck" flipping homes and condos will dry up.
But, leaving aside these mega-investors with tons of money to invest, how will increasing mortgage rates affect the more typical home buyer? That's a mixed bag for sure.
The good news is that whenever mortgage rates start to rise, there is always a temporary surge of people wanting to lock in lower rates while they can. We've seen some of that in the new construction business in the Tampa Bay market. But with banks insisting on loaning only to those with near-perfect credit scores, it’s not clear that not many people are going to be in the "let's lock down an really attractive rate now" market this time around. Many families and first time buyers who would like to buy a home at these attractive rates simply cannot qualify for a loan under the tight credit rules.
Other families who would like to move up to a larger home can't do it because they are still "under water" on their current home. When you have negative equity in your current home, you cannot afford to sell it. The larger or nicer home they want is just beyond their ability regardless of the interest rate market.
Conversely many luxury real estate properties along the Tampa Bay waterfront from Clearwater and Sand Key down to St Petersburg Beach are selling in cash deals so tightened credit has little or no effect on these buyers of high-end homes and condos.
In summary, the Tampa Bay real estate market is in unchartered waters these days. We'll just have to wait and see how this turns out as the Fed begins to let mortgage interest rates rise over the next year or two.
