Home sales fall as mortgage rates tick up
Shift seen in Houston market
After several month, Angelina Keck’s $2.4 million listing in the Memorial area found a buyer. The deal was set to close later this month until Tuesday, when Keck of Angelina Keck Properties got a call from the buyer’s agent telling here the deal was off.
In the time since the contract was signed, mortgage rates had risen from 3.5 percent to 5 percent, putting the home out reach of the buyers, who hadn’t locked in the rate quoted by their lender in September.
“They said they can’t do it,” Keck said. “Everyone’s sick about it. These people loved this house.”
Rising mortgage rates are threatening to cool the red-hot housing market in Houston and across the country. In Houston, analysts say higher interest rates may have contributed to the region’s first year-overyear drop in home sales since March. September sales fell 6 percent from a year ago, the Houston Association of Realtors reported Wednesday.
The national average interest rate for a 30-year fixed-rate mortgage increased to 5.05 percent — its highest level since February 2011, the Mortgage Bankers Association said Wednesday. The average 15-year rate moved to 4.44 percent, its highest level since 2010
Other factors that may have contributed to the decline include market disruptions caused by Hurricane Harvey, which shut down sales in late August 2017 and pushed them to September. The recent uptick in mortgage rates could further dampen Houston-area
home sales, which last month registered a nearly 6 percent decline, the first year-over-year drop since March, new monthly data out Wednesday show.
“With tight inventory, rising interest rates and families focused on back-toschool, it wasn’t a huge surprise to see market activity slow down at this time,” Kenya Burrell-VanWormer, the association’s chair, said in its monthly market report. “The Houston economy is strong. As we head into the fall months, it will definitely take a healthy supply of homes and some pricing moderation to keep prospective buyers engaged in the market.”
Though it varies by neighborhood, the local market has started to shift to one that’s slightly more favorable to buyers, said Alex Doubet, CEO of Door, a Dallas-based real estate firm with operations across the state.
“I liken it to, we’ve been going 95 in a 75 miles per hour zone,” Doubet said. “Now we’re going 85 in a 75 miles per hour zone.”
Some analysts say higher rates won’t have an appreciable impact on the local market and that activity is simply leveling off after a strong showing this past summer and record sales in September 2017.
Buyers last month closed on 6,548 single-family homes at a median price of $232,500, which was flat compared with last year, the association said.
Most of the homes in Dexter Cole’s small neighborhood in Katy sell quickly, and his was no exception.
At the end of May, Cole and his wife listed their family’s four-bedroom, red brick house for $269,000. They had a buyer within a couple months without having to drop the price.
“It’s a really nice area,” he said. “The schools out there are really good, and we’d remodeled the whole house.”
Jim Gaines, chief economist at the Texas A&M Real Estate Center, said that even with the dip last month, Houston-area sales are up almost 6 percent year-to-date and are expected to beat last year’s record come year end. Prices, too, should come in above 2017, although the increases have begun to slow.
While rising mortgage rates will squeeze some buyers who will have to spend more on a home or find a smaller one, it won’t have an outsized impact on the market, he said.
“Five percent is still historically a very good interest rate,” Gaines said. “During the housing boom from ’03 to ’06, the average mortgage rate was about 6 percent or a little better.”
Keck, who sells luxury homes, isn’t as optimistic.
“I think there are going to be a lot more houses sitting on the market,” she said. “We’re going to have a lot more frustrated sellers.”