3 Months, 3 Housing Trends: Mortgage Rates, Home Sales and Hurricanes

Mortgage rates: Up, maybe

Most experts think mortgage rates will rise through the final three months of the year, although not by much. Blame the Federal Reserve, which is expected to raise short-term interest rates in December to keep inflation from rising much higher in the years ahead.

“The Fed is pretty committed to tightening, and I think they’re going to expect rates to gradually move up,” says Danielle Hale, chief economist for Realtor.com. None of this will be a surprise; Hale expects Fed officials to keep “explaining to the market what they’re doing before they do it.”

Raymond Eshaghian, president of GreenBox Loans, a multistate mortgage lender in Los Angeles, agrees that mortgage rates will rise, unless instability pops up in North Korea or elsewhere.

“Anybody who thinks rates will be low eternally is naive,” he says. “But it’s all relative. Even as rates go up, rates are still low.”

But not everyone thinks rates will rise.

Rick Sharga, chief marketing officer for Ten-X, an online real estate platform, expects mortgage rates to stay flat, or even dip, because “lenders would like to lend. I would be surprised to see the lending industry ratchet up loan rates in what is traditionally a relatively slow time for lending.”

Homebuying for the holidays

Homebuying tends to slow in the final quarter of a typical year, as buyers focus on the winter holidays. But 2017 hasn’t been typical. Expect lots of home buyers to spend less time celebrating and more time continuing to look for houses.

“Typically, you have fewer buyers in the fourth quarter,” Sharga says, “but I don’t think that’s going to be the case this year, because we have buyers who simply haven’t been able to find anything to buy all year who will continue to look for properties.” This is especially true, he says, in places where demand for affordable homes dramatically exceeds supply: coastal California, the Pacific Northwest, Austin and Dallas, for example.

Home buyers who remain in the hunt might find less competition for the homes that are still for sale.

Because fewer homes are on the market during the holiday season, buyers “kind of just go into hibernation,” says Brian Koss, national head of production for Mortgage Network, a multistate mortgage lender in Danvers, Massachusetts. Then buyers start looking again in January, fueled by resolutions to buy a home in the new year, he says. Savvy buyers can take advantage of that relatively dormant period before January, when fewer people are looking for homes.

Storm damage will have nationwide impact

Even if your town wasn’t directly affected by hurricanes Harvey and Irma, you’ll see prices rise for drywall, plastic pipes, roof shingles and other home renovation materials, says Robert Dietz, chief economist for the National Association of Home Builders. Lumber prices will rise near the hurricane zones, but they won’t necessarily go up nationwide.

Dietz says he expects to see a national decline in home construction until the middle of 2018, because so many laborers will be doing repairs instead of building new houses in and near the hurricane zones. It will be enough to affect the national numbers for housing starts and new home sales. The hardest-hit areas in Florida and Texas are places that typically account for 14% of single-family home construction nationwide, Dietz says.

Be of good cheer

Even if mortgage rates rise in the final three months of 2017, they’re still low by historical standards. Some home buyers might keep looking during a slow time of the year and find affordable places of their own. And labor shortages won’t deter do-it-yourself home renovators.