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Mortgage Rate Hike May Affect Florida's Housing Market in the Long Run

The Federal Reserve's decision to hike interest rates for the first time in four years could have some long-term effects on the Panhandle housing market, but not in the way some might first expect.

For now, though, local experts predict no slowdown in sales.

"We're still at a 30-year low on mortgage interest rates," said Mike Hammonds, home loan consultant with Countrywide Home Loans. "I don't see that it's going to change." Prime interest rates affect short-term loans, such as car payments and credit cards, he said, and don't really have a direct bearing on longer investments, such as 30-year, fixed-rate mortgages.

Instead, the market drives those rates. As long as people have the ability to borrow money, Hammonds said, prices stay low. And with local rates at around 6.25 percent, more homebuyers are able to take on larger mortgages.

Over time, though, increases could take their toll.

Consider this: As the prime interest rate increases, a homebuilder sees business costs increase. Credit card bills, company truck payments and other short-term lines of credit lead to bigger bills, which are reflected in a higher asking price for the home.

At the same time, a homebuyer also is watching the credit card bills and other payments grow. The added debt, along with higher home prices, might cause him or her to shy away from the housing market, leaving the lender without that mortgage.

And the less people borrow, the more likely mortgage rates are to go up, said Roy Crecelius, office manager of ERA Neubauer Real Estate's Panama City Beach office.

Currently, however, this scenario is far from reality.

"There are so many programs available (to homebuyers)," Hammonds said. While about 10 or 15 people get preapproved in a normal market before going out and looking for homes, he said he currently has upwards of 70 on file.

"There's a huge selection (of loan options) to be able to choose from," he said.

Inventory, however, is a different matter. "In this area if it's a decent home, and by that I mean barely livable, it will sell in just one week's time," he said. "By the time they find a house they want, it's sold."

While 30-year mortgages are protected from rate changes, adjustable-rate mortgages are more vulnerable. According to the Christian Science Monitor, someone who took out a $200,000 one-year ARM late last year, the payment could increase from $926 a month to $1,086, or about 17 percent, by year's end.

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