Mortgage rates at or near record lows have been a key factor in the comeback of the nation's housing market since the 2008-09 recession, but there are some warning lights on the dashboard. Rates have risen in recent weeks and economists predict that trend will continue, which could threaten the fragile market. However, that doesn't appear to be a major concern here in Houston. "I think it's going to be a slight increase (in interest rates), it usually does this time of year, but that's kind of expected," says Danny Frank, Chairman of the Houston Association of Realtors. "But we're still near an all-time record low for interest rates, it's not like back in the 80s when people were paying 17% or 18% interest."
Frank tells KTRH that the Houston real estate market is growing so fast, a decline in interest rates might actually be a good thing. "The prices of Houston homes are disproportionately growing a little bit higher than they need to, creating kind of a little bubble, and it may slow that down just a little bit," he says. Right now, a combination of low inventory and a booming local economy creating greater demand are driving Houston prices up. "We're up 28% from this time last year, and we're on a 24-month high of average prices," says Frank. Simply put, he argues, Houston is a seller's market right now.
Current mortgage rates are still hovering around 4%, and Frank doesn't see any sign that there will be a major increase anytime soon. "But (rates) are going to gradually start increasing a little bit, so now's the time to buy that home," he says. In the short term, that makes Houston a realtor's dream: both a buyer's and seller's market. In the longer term, it remains to be seen if interest rates will rise to a level that reduces demand and brings prices down again.