The news of federal rate hikes did not discourage spring. We smell the sparkling floral notes of gardens, the spicy scent of fresh-cut lumber, the salty aroma of sea air: These are the scents of Spring time 2017 in Florida. Wait! Fresh cut lumber?
Yes, Palm State Mortgage staff members have noticed it on every other corner in the neighborhoods of Orlando, Jacksonville and Miami. We are enjoying the fragrance of the fresh-cut lumber of new houses and home-re-models.
A Fresh Outlook
Handshakes with customer after contract signature
The housing and construction industry is working hard to build houses to catch up with the demands of eager buyers. They want to meet the diminishing inventory of homes available to spring time home buyers.
We know the cost of such lumber is not cheap. We know national statistics don’t necessarily agree. But we see, hear and smell the sounds and sights of Florida home construction as it continues to heal a struggling housing industry.
So, Palm State Mortgage opened the topic of federal interest rate hikes in our previous blog article.
We wondered if the federal rate hike would affect the optimism we sensed in the recovering housing industry.
Although that article and this one stand alone, you might like to read the previous one, or review it, before continuing to read this one.
Federal Rate Hikes and Healing the Housing Industry
We felt some anxiety radiating off some of our friends in the real estate industry. They feared higher mortgage rates would explode our fragile home affordability. They also worried internationally at how much of a set-back housing would take.
At first no one dared to say that the rising interest rates might have a positive effect on the market. Then recently CNBC reported, “So far, there’s been no sign that the market is retreating. In fact, it seems more likely that the Fed’s actions could actually be good for the housing market.”
In a recent article they reported three reasons for believing that the rate hikes could actually help our struggling economy.
Federal Rate Hikes Help, Not Hurt: Reason One
New Buyers and New Homes
We are a nation of shoppers, and the shopper mentality in many of our homebuyers has been a little spoiled by the historically low interest rates. With the federal rate hike, a generation of potential homeowners now knows that prices on mortgages can go up, and quickly. Plus, they know that experts predict two more federal rate hikes for 2017.
This sudden realization has ignited a reaction often elicited by consumer psychology: New home shoppers are thinking, “We must buy now because the prices are going up tomorrow!”
CNBC stated, “these homebuyers will get off the fence and into the market before rates go any higher. At the very least this should result in more demand through the peak spring and summer selling seasons, and may even drive enough sales to have a positive effect on the overall economy.”
Federal Rate Hikes Help, Not Hurt: Reason Two
In the second place, lenders now have more incentive. Likewise, they have a little more protection against risk. Thus, they might relax a little from the iron-clad tight lending standards of recent times.
At Palm State Mortgage, we expect the higher rates will also drive down the “number of refinance loans being issued, which lenders may try to offset by doing more purchase loans.”
Federal Rate Hikes Give More Help, Not More Hurt: Reason Three
In the third place, let’s join CNBC in pointing out the beauty of Predictability. They said, “the 25 basis point hike was well within the range that most industry analysts had expected…”
The mortgage industry paved the way for the federal rate hike and consumer cautions were given. Just as the financial world predicted, the federal rate hikes did not push the mortgage rates up significantly.
Recent Federal Rate Hikes in Summary: Vitamins for the Housing Industry
Businessman writing “Apply now” on a clipboard.
As they stated, “rates on 30-year and 15-year fixed rate loans are basically unchanged, and still at the low end of historical rates.” In part this explains that “Lenders from institutions of all sizes are optimistic about the direction of the economy, with the share of lenders who think that the economy is on the right track reaching the highest level since the survey’s inception in the first quarter of 2014.” Palm State Mortgage Company thinks that is a very special statistic.
With this spring’s energetic house hunters, relaxed fiscal lenders, strong employment reports, more relaxed lending standards, and only slight mortgage rate increases, 2017 could become “one of the best spring selling seasons the housing market has seen in many years.”
And at Palm State Mortgage Company, we hasten to add, that’s as much because of the federal rate hike as it is in spite of it.
