home sales interest rates

Fed rate increases have done little to slow Charleston-area home sales. File photo

Many who have been considering buying a house have been wondering how the recent Fed rate increase will affect them.

The answer: probably not much.

The Federal Reserve raised its benchmark interest rate on overnight loans a quarter point to 1 percent earlier this week. Several more similar rate hikes are expected over the next two years.

The increases should "have little to no influence on the 15- and 30-year mortgage rates," said Dave Sansom, president of the Charleston Trident Association of Realtors and chief operating officer with Carolina One Real Estate.

“Each time the Fed raises (or lowers) rates there are consumers that become concerned, since many people are unaware that mortgage rates and the Fed's rate are not tethered together," he said. "I take the short-term rate hikes as a good sign that the economy is strong. A strong economy will keep the housing market strong."

Mortgage interest rates this week are averaging 4.30 percent for a 30-year fixed-rate loan, compared to 3.73 percent a year ago, according to financier Freddie Mac. In other words, rates have already been creeping up. Despite that trend, earlier this month, the Charleston Metro Chamber of Commerce projected double-digit annual growth in home sales through 2018.

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Bob Lee, Southeast region divisional sales executive for Bank America, also didn’t expect the Fed rate hikes to have much effect on residential real estate.

“I haven’t seen, and don’t expect to see, any huge effect on the housing market,” he said. “I think there is a natural concern among consumers, specifically those looking to buy a home soon, about higher rates. However, it’s important to keep perspective — many previous generations of homebuyers purchased homes at significantly higher interest rates than what we enjoy today. Also, most people will find that their projected monthly mortgage payments won’t change significantly enough to put homeownership out of reach.”

On the other hand, higher mortgage rates could encourage existing homeowners to take advantage of home-equity lines of credit to remodel instead of moving.

“People will continue to buy homes, but history also shows us that as rates rise, more homeowners consider home equity lines of credit when they want to access the equity in their homes,” Lee said. “Many clients are remodeling or renovating their homes to reflect their current lifestyle needs instead of finding a new place to live.”

Reach Dave Munday at 843-937-5553.