Will rising interest rates dampen early signs of stability in Tampa Bay housing market?
Wake up and good morning. We've been patiently waiting for the decline in Tampa Bay housing prices to fall far enough to hit a bottom and stabilize. We're close. But now there's a new threat to the market -- rising interest rates -- which may delay recovery of the residential market by making homes more expensive to buy. Here's a Channel 10 TV report that captures the flavor of the precarious housing market here. (Photo: Bill Serne, St. Petersburg Times)
The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week. That's the highest level since last summer. Is this a blip or a trend? Here's what Christopher J. Mayer (photo, right), a professor of finance and economics at Columbia Business School, told the New York Times this past weekend:
"Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market. It’s a really big risk.”
A big risk especially to Florida housing markets in a state economy most vulnerable to added pressure on home prices. As the Columbia professor explained, each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home. And the Mortgage Bankers Association expects the rise in rates to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year. Here's the New York Times story.
Don't forget there's a nice $8,000 homebuyer's credit out there but the time to use it is going quickly. You must enter into a binding contract to buy a home before May 1, 2010, and close before July 1, 2010. More information here.
-- -Robert Trigaux, Times Business Columnist