INTEREST RATES ARE STILL AMAZINGLY LOW

Recently I met a lovely young couple at a builder’s sales center looking to purchase their very first home. While they were excited, it was obvious that they were also concerned about home values and the possibility that they might decline.

The good news for that couple — and for everyone lucky enough to already own a home — is that home values are soaring pretty much everywhere. Even so, Forbes magazine recently named Orlando as one of the top five most undervalued markets in the United States.

But this same couple made an observation that took me by surprise; they were even more concerned about interest rates. The rise from 3.5 percent to just over 4 percent had them a bit spooked, so they wanted to lock in their rate as soon as possible.

That’s when I realized that today’s buyers have become accustomed to the shockingly low rates of recent years without paying much attention to historical mortgage norms.

While rates have been at their lowest levels in 80 years, there has been a downside. Qualifying for many potential buyers has been very difficult. But there may be good news on that front as well.

Lenders have been buoyed by a rash of refinancing, and with the bump in interest rates, the refinancing market is expected to diminish. As a result, banks will need to look elsewhere to maintain volume. Therefore, underwriting criteria should ease as banks try to make more loans.

So, while rising interest rates are never what a homebuyer wants to see, in the long run it should open help more families qualify for home loans.

But I must admit, hearing the couple lament about 4 percent interest rates made me think back to the day of our first home purchase in 1982, with its 20 percent down payment and 12.5 percent negative amortization.

These kids today don’t know how good they have it.
 
THERESA SWANSON
Publisher
theresas@thefloridahomebuyer.com