Real estate professionals are closely watching interest rates for any increases, amid widespread concern that higher mortgage rates could slow the housing market this summer.
Higher interest rates increase borrowing cost for buyers and can make it more difficult to qualify for a mortgage.
Julie Cooley, a vice president and mortgage loan originator at First National Bank of Durango, said interest rates should rise this year.
“As far as will rates go up? Well, probably,” she said.
Rates could hit 5 percent this year for standard 30-year fixed-rate mortgages, Cooley said. “I think there’s a good possibility that this year it will.”
Nationwide, mortgage rates averaged 4.34 percent last week, according to Freddie Mac’s weekly survey released Thursday.
Rates have risen sharply from a year ago. March’s average – also 4.34 percent – was up 0.77 percent from the same month in 2013.
Lisa Reed, broker-owner of Southwest Mortgage Loans Inc., said rates will “stay low enough through the summer to still be attractive to buyers.”
“We will continue to see the rates fluctuate through the summer with a 30-year conventional, fixed-rate loan to be at 5.25 percent by the end of the calendar year,” she said in an email message.
Jeanne Randazzo Szczech, broker-owner of Arete Mortgage in Durango, also forecast a rate increase.
“Six months, I would say, in a worst-case scenario, it’s a half-point higher,” she said.
She’s advising refinancing clients to lock in rates as soon as possible. “I believe that rates will certainly be going up,” she said.
During the course of a 30-year mortgage, a 1 percentage point rise in interest rates can cost borrowers tens of thousands of dollars.
Interest rates are only one factor that is affecting housing affordability, said Bob Allen, a Durango real estate analyst and appraiser.
“A rise in interest rates, higher median home prices or slow income growth all impact housing affordability,” he said in an email message.
With in-town homes costing $370,000 on average in 2013, any rise in interest rates could keep more potential homebuyers out of the market. That, in turn, would keep the pressure on the rental market, where vacancies are scarce and rents are on the rise.
Szczech said some of her clients are ready to buy but are finding little on the market. Low inventory has been a recurring complaint of real-estate professionals this year.
“I have a lot of people who are preapproved to purchase, but there’s really nothing to purchase right now,” she said.
Tight inventory is leading to bidding wars on some houses, Szczech said.
“We’re seeing multiple offers – and cash offers winning,” she said.
With inventory tight, homes on the market may draw interest from potential buyers regardless of higher interest rates.
“Our real estate market is pretty hot,” said Szczech.