Mortgage Rates Affect You

Mortgage Rates Affect You

The past year has been a wild ride for the Ft Lauderdale real estate market. Across all of southern Florida, real estate values saw increases of 15-25%. However, over the last couple of months, this growth rate has begun to slow. This could indicate the fastest growth of housing prices may be behind us.

Recent increases in mortgage rates may have something to do with this start of a more controlled growth. For anyone who owns or plans to purchase a home in the future, it is crucial to understand what is happening in the mortgage market and how it will affect you.

Mortgage Rates - A Historical Perspective

Although interest rates have see-sawed in the past few months, the current figures are still well below historical averages. I remember the early 1980’s when my Mother was a Realtor in Buffalo, NY and interest rates topped 18%. By 1990 interest rates had declined to 10% and by 2000 they had fallen to 7.5%.

Following last decade’s housing collapse, consumers saw mortgage rates tumble to historic lows of 3.42% for a 30-year fixed mortgage. Thanks to the Fed spending $85 Billion every month to purchase US Treasury and mortgage bonds, rates have stayed low to encourage home ownership.

Recently in June 2013 the Fed indicated it would gradually taper the pace of these purchases. The result was an dramatic increase in the mortgage rate peaking over 4.5%.  This caused the Fed to back off it's tapering plan and rates dropped back to 4.2%.  Likewise, since October 2013's employment report showed only average growth (possibly due to the Government shutdown), it’s unlikely the Fed will reduce purchases this year.

As the housing market continues to improve over time the Fed has indicated it will taper it’s purchase of US Treasury and mortgage bonds and the mortgage rate is expected to increase in the future.

Mortgage Rates Affect You As A Buyer

Low interest rates have played a significant role in the dramatic growth in Ft Lauderdale's real estate market thus far in 2013. However, as rates rise there will be fewer buyers competing for the inventory which means less competition, fewer multiple offers, and Ft Lauderdale property values will slow their recent frenzied rates of increases. We will still have our foreign investors paying cash and we expect growth to continue, just at a more controlled pace.

Mortgage Rates Affect You As A Seller

 If you plan on selling within the next couple of years, slowed growth may mean that the process of finding the right buyer for your home could take longer.  Having fewer buyers means longer days on market, fewer multiple offers, fewer bidding wars, and lower sale prices.

While interest rates will hopefully stay low through the near future, the situation is filled with uncertainty. Ft Lauderdale real estate values are still continuing to rise, and the good news for everyone is that interest rates are still extremely low. As they rise though, they may begin to create a number of different problems for buyers and sellers. Luckily, the current market has advantages for everyone.

For homeowners, the market is still extremely hot, despite the beginnings of slowed growth being seen. The only way to combat these eventual increases is to take action now, while the opportunity is still open.

Joseph Schutz
EXIT Ryan Scott Realty

http://JoeSellsFtLauderdale.com