The Federal Reserve signaled it is moving closer to raising interest rates in its monetary policy update on Wednesday, but for now, held rates near zero. Some local realtors and mortgage bankers now think mortgage rates are set to rise sooner not later.
“The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent,” the Federal reserve bank statement said. “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
That will likely cool the Pasadena real estate market, some local experts said, but not spawn a major downturn in buying activity.
Local mortgage broker Kenji Tatsuno of Kennedy Capital Corporation in Pasadena said an increase in interest rates might “change some appetites.”
Tatsuno said that for the real estate industry and mortgages, it’s still a question of supply and demand, pointing out that there are currently only 950,000 available homes in the U.S., not counting any new construction.
Locally, he said, the fact that most homes in the San Gabriel Valley have an entry-level home of $1 million dollars, could also cool the market with a higher interest rate at play.
He predicted that the US could see a 1% rise in the interest rate by the end of the current quarter.
“We could see the interest rate unspool over the next six months, but it has to settle somewhere,” Tatsuno said, adding that he thought that 4.5% might be its highest point.
The average home buyer then might have less competition with higher interest rates thinning out the field, Tatsuno said.
Bill Podley of Pasadena real estate company Deasy Penner Podley expects the mortgage rate increase but puts in a range that historically is still “excellent.”
“As a housing person, we’re going to see some increase in mortgage rates. We’ve already seen a bit of a ratchet up, perhaps a quarter of a point, maybe as much as a half. But prognosticators who seem to understand these things think they probably will not go higher than the high threes this year. We might hit 4%,” Podley said.
“Historically, anything in the threes is still very excellent, relative to where we have been some time ago,” Podley observed.
He noted that in the early to mid-80s, the interest rate was in the high teens, though it has been low for years now.
