Morning Briefing: Buyers won’t be put off by higher interest rates

by Steve Randall16 Dec 2015
Buyers won’t be put off by higher interest rates
With the Fed widely expected to increase interest rates by 25 basis points this week with further hikes to come, Zillow Mortgages has polled consumers to gauge how it might affect their home-buying plans. Among those who are planning to buy a home next year 70 per cent of respondents said that they will go ahead even if rates hit 4.5 per cent. However, the choice of home could be a reconsideration with smaller properties or lower-priced neighborhoods likely.

Zillow’s data also shows that for most homeowners the impact of a 50 basis-point rise in interest rates would have minimal effect (around $25 per month) while in the least affordable metros, such as San Francisco, owners could need to find an extra $175 for their mortgage payments. Erin Lantz, vice president of mortgages for Zillow Group said: "It's important to remember that while a hike would result in higher rates than we have been accustomed, they are still historically low. Mortgage rates are an important factor to consider during the home buying process, but personal considerations about the home type and location should trump concerns about moderate rate changes."
Builder confidence slips on high cost of lots, labor
Rising costs of lots and labor are continuing to subdue the otherwise high sentiment among builders. In consideration of the market for newly constructed single-family homes the National Association of Home Builders and Wells Fargo Housing Market Index slipped this month to 61 (down 1 point from November).

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo.

NAHB chief economist David Crowe added that the index over the past seven months has been consistent with recovery and is confident in the coming months: “We anticipate the housing market to continue to pick up traction as we head into 2016.”
Fannie forecasts first-quarter growth
Fannie Mae expects that economic growth will pick up pace in the first quarter of 2016 and add momentum to the housing market. Its Economic & Strategic Research group’s report noted the softening of economic growth towards the end of this year but forecasts better job and income growth ahead.

Chief economist Bob Duncan commented on the housing market: “Home sales will likely remain subdued in the near term, but private residential construction spending started the fourth quarter on a strong note and housing demand is looking up as we head into next year,” said Duncan. “The rebound in purchase applications suggests that sales will gain momentum in the first quarter after retreating slightly in the current quarter.”

He said that total home sales are projected to rise 3.9 percent in 2016 with loser mortgage lending restrictions further boosting the housing sector.


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