Rising mortgage costs, new rules will tap brakes on runaway housing market in Dallas area. The housing market is growing at an unheard-of velocity. But the double-digit, near-record gains in home prices and sales that have been the story over the summer in North Texas and around the country could be coming to an end. Higher mortgage costs and tougher loan standards are likely to dull the sharp increases that housing has seen this year, most analysts agree. Home financing rates have already risen about a percentage point so far in 2013. And economists expect further gains — perhaps another percentage point — next year. “We are talking next year probably just over 5 percent average interest rates,” said Jed Smith, managing director of research for the National Association of Realtors. “It should not kill the market, but it decreases affordability and will slow things down.” Increases in average mortgage rates since January have added more than $100 to the monthly payment of a $200,000 long-term fixed rate loan. An additional 1 percentage point or so increase in 2014 would tack about $75 onto the payments. “In terms of affordability, there is a limit to what the consumer can pay,” Smith said. “One of the factors that’s been helping to buoy the housing market has been that interest rates have been very low. “And they will continue to be reasonable in terms of historic experience.” But every increase in mortgage costs and home payments reduces the dollar amount that a buyer can afford to pay for a house. And stricter mortgage underwriting standards that are taking effect will have tighter total debt limits for some kinds of loans. Heat couldn’t last Economists were already forecasting a slowdown in the housing frenzy for late this year or in early 2014. So far in 2013, North Texas home prices have risen about 11 percent, more than twice the average annual rate. And nationwide, prices are about 14 percent higher than they were a year ago. Sales of pre-owned single-family homes in North Texas are 20 percent higher this year. Nationwide existing home sales are expected to be up 12 percent. “These high rates of increase in sales and prices were going to cool off any way,” said James Gaines, an economist with the Real Estate Center at Texas A&M University. “I think it will be gradual.” Gaines said new mortgage rules that are part of federal regulations developed after the housing crash will require borrowers to come up with higher down payments, have lower total debt and better credit scores to get the lowest interest rates. “That might make loans more expensive,” he said. “The mortgage rates in general are going to go up anyway. “Yes, it will impact some people on the margin to go with a lower-priced home to be able to afford the payments.” Higher mortgage costs this year have already caused a huge drop in the number of home refinancings. And mortgage companies are laying off thousands of workers that handled mortgage refinancings. “About 10,000 to 15,000 people have been laid off,” Gaines said. “They don’t need the level of personnel they had when refinancings were most of the market.” Monthly housing surveys show that along with fewer refinancings, the higher mortgage costs are slightly reducing the number of home sales and perhaps home starts as well. Welcome cool-down Some economists expect that after this year’s eye-popping gains, a moderation in home purchases and smaller price increases will be welcome. “It has been a crazy summer for home prices,” said Jed Kolko, economist with Trulia Inc. “What’s going on now will slow prices and avoid a bubble.” Kolko said more homes are coming on the market, which will increase inventories. And recent price increases have pushed some investors out of the market, which will also reduce pressures on housing. “Prices are still rising at a fast clip but not as fast as they were earlier this year,” he said. Kolko said while the impact of new mortgage regulations is uncertain, the requirements should make more mortgage dollars available to consumers. “All of this makes owning more expensive,” he said. “But it’s another step for the housing market to move back toward normal.”
Posted on: Thu, 03 Oct 2013 23:03:48 +0000
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