Area real estate brokers say they're not worried that the recent rise in interest rates will slow the depressed but improving Tampa housing market. That's because they say the spike may push more buyers into the market before rates rise any more.
TAMPA - After a few years of rock-bottom housing prices and mortgage rates, the Tampa Bay area's real estate suddenly isn't so cheap anymore.
Mortgage rates have risen half a percentage point in just the past week and a full percentage point in a little more than a month. The new average rate on a 30-year fixed loan is 4.46 percent, where it had been 3.93 percent last week and just 3.35 percent in early May.
Local real estate agents and mortgage brokers say not to worry. Mortgage rates and home prices are still low historically, but the new rates already are rippling across the local housing market.
Slightly more home buyers may be hitting the market, as they try to snap up homes in case mortgage rates rise more. In the longer term, though, higher rates could deter home sales if they rise further. The refinancing business has taken the biggest hit, because masses of people paying 5 percent on their mortgages suddenly can't drop to a more attractive rate in the 3 percent range.
"I probably had about five calls last week on refis, and when I ran the figures I said, 'You should've called like two months ago,'?" said Kay Hubbard, a Tampa mortgage broker.
Mortgage rates spiked last week after Federal Reserve Chairman Ben Bernanke suggested the Fed might cut back its efforts to keep interest rates in check. The effect on people's monthly payments has been especially significant since rates started rising last month.
For example, in May someone might have gotten an attractive 3.5 percent rate on a fixed, 30-year $300,000 loan, requiring a monthly payment of about $1,350. Suddenly, that was up to $1,520 a month, not factoring in someone's down payment or mortgage insurance costs, Hubbard said.
People wanting to buy pricey homes and commercial buildings will feel the biggest effect, said Gary De Pury, a Lutz- based real estate broker. One of his clients, for example, was set to buy a $1.2 million commercial property at a low rate of 3.4 percent. The sale got delayed a bit, and today that same client is looking at 4 percent interest.
"That six-tenths of a percent on $1.2 million, it hurts," De Pury said.
Still, most real estate experts surveyed Friday downplayed the effects on the state's housing market. The higher rates could slow down the market a bit, but shouldn't stop its momentum altogether.
John Tuccillo, economist for the Florida Realtors trade group, said the real trouble with Florida's housing market is people's inability to get loans, not high mortgage rates.
"The kind of jump we've seen in the past month will reverse itself some," Tuccillo said. "That having been said, I think the greater problem in the market is accessibility to mortgages."
Meantime, home buyers struggling to compete for homes against cash-rich investors could find some relief. Rising interest rates should convince some investors that they'll find better investment opportunities elsewhere, Tuccillo said.
Dave Ansel, a mortgage broker at VanDyk Mortgage in St. Petersburg, said anything under a 5 percent interest rate is a "really good rate." The refinancing business has stalled, he said, but the new higher rates shouldn't deter anyone from buying. Interest rates during the red-hot market of 2005 and 2006 were generally above 6 percent, figures from the government-sponsored mortgage giant Freddie Mac show.
Pam Marron, a broker at Bankers Mortgage of Pasco County, expects home buyers to start considering something other than a plain-vanilla mortgage.
For example, lenders are starting to offer a new adjustable-rate mortgage, or ARM, that offers a fixed interest rate for the first 10 years. It fluctuates after that. She has seen these new ARMs offering interest rates of just 3.375 percent for the first 10 years, she said.