As anticipated, the Federal Reserve voted Dec. 14 to raise the federal funds rate by a quarter point. I thought it would be “fun” to show the effects of interest rate hikes on a $300,000 mortgage with a 30-year term:
As you can see, a quarter point
difference is not that significant, but
a half point can make the difference
for home buyers already barely able to
qualify.
As interest rates rise, existing
adjustable mortgages and home equity
lines that are tied to the prime rate
will be affected. Most adjustable rate
mortgages adjust only on an annual
basis, but most equity lines will feel
the increases immediately.
When you consider other interest
rate hikes for consumer debt such as
auto loans, credit cards and student
loans, the aggregate effect can impact
real estate. When interest rates go up,
so does the household’s monthly debt.
National and local statistics show
our housing inventory levels are at
record lows and that new housing
starts are way below historical averages,
particularly during the most
recent meltdown. It is generally agreed
that more new housing starts are
needed to accommodate first-time
homebuyers, population growth and
natural obsolescence. The increases in
interest rates mean it will cost developers
more to borrow money to pay for
the land and construction costs which
will get passed along to the buyers.
Things are not in an emergency
situation yet, but looking at the aggregate
effect on everyone’s pocketbook
means it will likely affect housing in
one way or another.
Home Price Round-Up
>> LOW
60847 Granite Dr., Bend, OR 97702
5 beds, 2 baths, 1,485 square feet,
.27 acre lot
Built in 1973
$163,900
Listed by Cascade Sotheby’s International
Realty
>> MID
61042 Parrell Rd., Bend, OR 97702
4 beds, 1.5 baths, 2,149 square
feet, .29 acre lot
Built in 1965
$375,000
Listed by John L. Scott Bend
>> HIGH
1182 NW Redfield Cir.,
Bend, OR 97703
3 beds, 3 baths, 4,008 square feet,
.97 acre lot
Built in 1997
$1,075,000
Listed by Bend Premier Real Estate LLC
This article appears in Dec 21-28, 2016.
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