FIND YOUR NEXT HOME by...

CITY: Select a City / Location: Choose a property type:
What is your price range?

Number of rooms required?
SUBDIVISION: Enter a Subdivision:

Choose a property type:
What is your price range?

Number of rooms required?
SCHOOL: Enter a School:

Choose a property type:
What is your price range?

Number of rooms required?
ZIP: Enter Zip Code Choose a property type:
What is your price range?

Number of rooms required?
MLS #: Enter MLS Number: MLS Number: MLS Number: MLS Number:
MAP: Select a Starting Point: Choose a property type:
What is your price range?

Number of rooms required?

Need more options? Try our Advanced Search!

Could Interest Rate Increase Impact Houston Real Estate?

Posted by 2M Realty on Sunday, February 28th, 2010 at 10:59pm.

Contact 2M Realty about the The Bayou City Blog

For several months, those attuned to the Houston real estate market have considered how a change in rates might affect their interests. That answer may be on the way sooner than anticipated due to the Fed’s decision to increase the discount rate on February 19.

The decision to boost the discount rate to 0.75 percent from 0.50 percent marked the first increase in a year. As Yahoo noted, “The announcement shouldn’t have come as a complete surprise, though,” (yahoo.com).

The discount rate is the interest rate charged to commercial banks by regional Federal Reserve banks (i.e. the discount window). Though this rate increase may not directly impact mortgage or business lending rates, the argument can be made that such fluctuations eventually trickle down to the local level.

Fed Chairman Ben Bernanke had indicated that an increase in the “spread between the discount rate and the target federal funds rate was expected before long. Still, to help quell concern about what may be in store, the Fed expressed that its decision was not a signal for any change in the economy or monetary policy,” (yahoo.com).

The bottom line, however, is rising rates will certainly influence the decisions of buyers and sellers. With 30-year fixed mortgage rates at roughly five percent, a low figure historically speaking, and homes selling at discounts nationwide, motivation to buy is easy to find.

When one takes into account the federal first-time and repeat homebuyer credits of up to $8,000, the prospect of purchasing Houston real estate – or real estate in sub-markets such as the Huffman real estate and Galveston real estate markets – becomes even more appealing. The credits, however, are set to expire on April 30.

The Yahoo story indicated that the decision to raise the discount rate was not based solely on an outlook of economic stability. According to the story, several Fed officials made comments “about how to interpret the move, but many seemed to ignore the notion that the increased discount rate was a tacit sign that the financial system is back on firm footing,” (yahoo.com).

For the time being, buyers and sellers of Houston real estate must wait to see if the Fed’s latest move has any impact on local real estate markets. The decision, in theory, removes a measure of liquidity from the economic system. But as long as lenders are willing to keep mortgage rates low, opportunities for buyers to benefit from the downturn and for sellers to upgrade will continue.

________________

2M Realty is a unique brokerage firm providing agents both traditional and Internet services throughout the Greater Houston real estate market. With its' Treehouse virtual platform, participating agents experience the freedom of working from home and get to retain 100% of the commission. This platform is an end-to-end online solution giving agents personalized websites, lead management programs, marketing collateral tools, form libraries, transaction management, electronic signature functionality and more.