I agree with the experts below. Timing may be right to buy now before mortgage rates rise. Even with current rising demand and housing prices, rates are historically low which increases affordability.
6 a.m.May 24, 2013
Peter McNamara and his 5-year-old daughter Keira look at a model home at a Pardee Homes' Watermark community near Carmel Valley on a recent Sunday. Record-low mortgage rates are helping drive up homebuyer demand. — Hayne Palmour IV
Market watchers are speculating when the Fed will start to scale back its mega-bond buying program called quantitative easing, or QE. The economic stimulus has helped keep U.S. mortgage rates at or near record lows, sparking buyer demand and refinancing activity. Would a wind-down of the program pose a threat to the housing recovery?
• Murtaza Baxamusa, directs planning and development for the Family Housing Corporation, of the San Diego Building Trades in Mission Valley: Yes. Federal stimulus successfully drove down interest rates below 4 percent for the first time ever, making homes affordable for new buyers and those who refinanced. Loans are cheaper now than in the early 1950s. Withdrawal of this stimulus would gradually inflate interest rates to their 20-year average of 6.5 percent for a 30-year fixed mortgage. San Diego still ranks among the worst in the nation in housing affordability. Prices are accelerating, and inventories dwindling. An increase in interest rates could precipitate another housing crisis in five years if income growth does not keep pace with monthly mortgage payments.
• Michael Lea, director of the Corky McMillin Center for Real Estate at San Diego State University: Under its quantitative-easing program, the Fed has been buying long-term Treasury and mortgage-backed securities. This strategy has been successful in keeping long-term rates low, stimulating housing demand and mortgage refinance as well as the stock market. It is time to end it. The housing market is no longer in need of life support and the risks of continuing the program are large. There is a risk of creating housing and stock-market bubbles. And continuing the policy makes the inevitable adjustment to market determined rates more difficult.
• Marco Sessa, chairman of the Building Industry Association of San Diego County and senior vice president of Sudberry Properties : Yes. Just how much is hard to say, particularly for supply- constrained markets like San Diego’s. Everyone expects that a wind-down of the Fed’s quantitative-easing program will result in higher interest rates. Higher interest rates obviously deter homeownership, but they also increase the cost of bringing homes to market. Both are bad for the housing recovery. However, there is a local housing shortage, which puts upward pressure on home values. This offsets the negative effect of increasing interest rates. Bottom line: If you didn’t buy in the last 12 months, there’s no time like the present – if you can find one.
• Robert Vallera, senior vice president of Voit Real Estate Services in San Diego: Yes, there is a threat, but no one knows how this will unfold. Like a cheating athlete, the market is juiced on low interest rates. When the quantitative easing tapers off, rising interest rates will create a drag on home values. San Diego’s median home price is now 6.7 times the median income, well above the historic average. It’s possible that household incomes might not grow quickly enough to offset rising mortgage rates and successfully support current valuations. Conversely, with housing in short supply here, a gradual rise in rates could play out far more smoothly than a sudden rate shock.
•Kurt Wannebo, real estate broker and CEO of San Diego Real Estate and Investments: No. Our housing recovery has been based on a multitude of factors including low inventory, programs that help struggling homeowners, public perception, overseas money and low interest rates. A slight increase in interest rates will slow down price increases but will not be extremely threatening to our recovery. However, it could slow the speed at which we are seeing things change.
Source: http://www.utsandiego.com/news/2013/may/24/mortgage-rates-qe-quantitative-easing-increase/
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