Feds raises rates to curb inflation, local experts react
(CBS DETROIT) - "These last two years have been such a heyday, and so crazy," said Dante Rosa, owner of Dante Rosa Home Loans in Macomb.
Rosa shared his views about the real estate market over the past two years, specifically relating to real estate values skyrocketing.
Interest rates over the last few years have dipped as low as 2.71%, which gave buyers the ability to pay more for homes. Lower interest equals a lower payment and a lower payment allows buyers to afford a higher purchase price.
However, mortgage interest rates rose to 6% for the first time in 14 years this week. The last time rates reached 6% was during the real estate market crash of 2008.
Although Rosa agreed with the Fed's recent action to raise rates and curb inflation, he said doing so too quickly could result in a shock to the market.
"They moved too quickly when they could've been doing so over the past few years, instead they said you know what, we're doing this and we're doing this now," Rosa explained.
Real estate experts and economists across the country have been predicting an impending market crash in the coming months, but some local real estate professionals said one factor that remains could delay a crash.
"Inventory is really not in the buyer's advantage right now," said Jeff Carroll, an agent at WC Collins Realty in Romeo.
Carroll, a 40-year veteran in the real estate industry, believes that - as long as real estate inventory continues to be scarce, it's unlikely real estate values will plummet significantly anytime soon. In 2008, real estate inventory was extremely high because of a boom in foreclosure. Carroll explained that's not the case today.
"Inventory is still low, even though we see a few more houses taking a little longer to sell," Carroll added.
There are a variety of factors that may indicate the real estate market is cooling off, mortgage interest rates being one of them.
According to the Mortgage Bankers Association (MBA), new mortgage applications are declining at a rate of about 1.5% week to week.
Another factor, according to Rosa, is refinancing.
"We've really seen about an 80-85% drop off in the refinance ability for clients, so that's a big challenge," Rosa said.
Since most homeowners refinance for lower rates, the increase is limiting opportunities for borrowers to realize a financial advantage in doing so.
