Fixed 30-year mortgage rates around the country rose last week from 5.25 percent to 5.48 percent with the week ending on Jun 7, according to a new report from real estate Web site Zillow.com. California’s rates behaved similarly, with its mortgage rates rising from 5.23 percent in the week ending on May 31 to 5.43 in the week with the most current data. Rates continued to rise on Monday with the average rate on Zillow’s mortgage marketplace at 5.62 percent.
“The worry is, that with rates going up, it’s going to slow sales and crimp the recovery in the housing market,” said Alan Gin, a professor of economics at the University of San Diego. The rates are rising due to fears of inflation as well as the credit market having a “huge” deficit it needs to make up for, Gin said. Despite the increase in interest rates, the current rates are historically low.
Prior to 2009, the lowest average annual interest rate for a 30-year mortgage on record was 5.84 percent in 2004 according to data compiled by Freddie Mac (NYSE: FRE) since 1971. Using the same table, the monthly average interest rate had never dropped below 5 percent until 2009. The average rate for 2009 is 4.97 percent so far, according to figures from January through May.
With sales heating up and prices on the bottom end of the market looking like they were stabilizing, the quickly rising interest rates could slow the market significantly — especially with a glut of foreclosures likely to come onto the market within the next few months. Earlier during the downturn, segments of the market most affected were on the lower end of the price scale.
However, the economy souring, people losing their jobs and higher interest rates does not bode well for any tier of the housing market, said Michelle Silverman, a Realtor who specializes in coastal regions like La Jolla.
“This is the most challenging market I’ve ever dealt with because it’s hitting everyone across the board,” said Silverman, who has been a Realtor for 18 years. “Normally, when we’ve had issues it’s only affected one group of buyers or individuals, but this is hitting everyone.” While Silverman has seen clients who are unsure if now is the right time to buy, and she “doesn’t think higher interest rates are going to help” them make the decision.
Gin agreed. He said while there have been many unsure whether it is the right time to buy a home, the rising interest rates may deter people from making a purchase. “That 5 percent was really a magic threshold that really caused a lot of people to sort of jump off the fence and get into the market,” he said. The rise in interest rates did not stop with 30-year loans. Rates for 15-year fixed mortgages were up from 4.78 percent to 4.95 percent, as well.
Article written by JEN LEBRON KUHNEY, The Daily Transcript, Tuesday, June 9, 2009
