The Federal Reserve’s announcement last week to continue quantitative easing erased a level of uncertainty that had been driving mortgage rates up over the last few months. This KCM blog explains the recent history and the impact of last week’s announcement on the real estate market at large. But what it leaves out is the reminder of the importance of understanding YOUR local market drivers.

ERA brokers from across the country last week weighed in on the recent impact of rising rates on their markets. The answers varied not only by region but by consumer segment, indicating that rates don’t have a one-size fits all effect.  It’s important to know how rates play out in YOUR market, whether you are an agent helping a client or a consumer considering making a move.

Bill Aboumrad with Legacy Real Estate & Associates ERA Powered in Silicon Valley, Calif., said rising rates have had no impact on activity in his market, which is booming.  Nearly 30 percent of his company’s deals in this affluent, move-up buyer market are all cash. In addition, commercial land purchases are prevalent.

Rick Reardon from ERA Reardon in Jackson, MI, Jeremy Raby from ERA Real Solutions, serving the Columbus and Cincinnati markets, and Gus Grizzard from ERA Tom Grizzard Inc. in Leesburg, Fla., are also seeing no impact on activity in their markets.

Reardon, who also runs a property management division, is encouraging homeowners to buy now and rent out their current home to gain increased equity as prices continue to rise, in order to take advantage of low mortgage rates.

But it’s a different story in Fayetteville, N.C. where Larry Strother, president of ERA Strother, reports that rising rates have kept many potential buyers on the sidelines. “Fayetteville is home to Army base Ft. Bragg and we serve many first-time homebuyers who are in the service.  While the increase in monthly repayments due to increased mortgage rates is actually quite small comparatively, the psychological impact of an increased mortgage payment is significant.”  The first-time home buyer is especially vulnerable when rates go up, he added.

In Colorado Springs, mortgage rates are impacting activity, but it’s not the only factor in the market cooling, according to Bill Hurt, president of ERA Shields Real Estate. “Refinance activity is way down, showings are down 50% year over year and inventory is up slightly, but this is a product of both mortgage rate increases as well as seasonality.”

In Bakersfield, Calif., Ken Carter of Watson Realty ERA says that rates are definitely stalling his market, mostly because the increase in monthly payments is pushing buyers, especially first time homebuyers, into a lower sale price, in which there is a lack of inventory.  

And in El Paso, Texas, Doug Van Nortwick, broker/owner of ERA Sellers Buyers and Associates says the rapid price appreciations that are happening in other parts of the country are not happening in his market because they were not as heavily impacted during the downturn.  Activity has been and remains steady here.

The Fed’s decision to continue to buy bonds that help support low mortgage rates is good news. As the economy continues to make a comeback, the path to homeownership has widened for many with the continuation of low rates and higher home affordability rates. For first-time homebuyers, that means lower monthly re-payments; for move up buyers, the opportunity exists to buy more house.  On the seller side, continued low mortgage rates will fuel activity that will drive prices up, particularly in markets with low inventory.

As we enter fall, the back to school mentality that drives a slight seasonal uptick in activity, might possibly be amplified by this latest development on the mortgage front.

We’d love to know what’s happening in YOUR market.  Let us know in the comment section.

Image courtesy of renjith krishnan at FreeDigitalPhotos.net