Financial Services

Mortgage Lenders Say Rates Still Attractive for Buyers

YOUNGSTOWN, Ohio – Even as the Federal Reserve raised short-term interest rates Dec. 19 for the fourth time in 2018, local mortgage lenders say rates are still relatively low and shouldn’t deter anyone from purchasing a home.

“Rates are very attractive and still make borrowing very affordable,” says Michael Garmone, vice president of residential lending at Home Savings Bank. “When rates go up, we end up seeing more activity in the short term because those sitting on the sidelines waiting to do something see rates move up and decide to act before they go up higher.”

The Federal Reserve increased rates 0.25% to a range of 2.25% to 2.50%. The last increase was in September and the Fed anticipates two more hikes in 2019.

“Job gains have been strong, on average, in recent months, and the unemployment rate has remained low,” the Federal Open Market Committee said in a statement. “Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year.”

The rate hike effects all types of borrowing, from home mortgages to credit cards. Since the beginning of 2018, Freddie Mac reported the 30-year mortgage rate climbed from 3.99% on Jan. 11 to 4.63% on Dec. 13.

Still, these rates are low compared to 10 and 20 years ago. In December 1998, the 30-year fixed rate was at 6.69% and in December 1988, it was at 10.46%, according to Freddie Mac.

Overall the Mahoning Valley housing market has been very strong this year, Garmone says. “From a production standpoint the bank overall is going to have our best year ever in terms of residential lending originations.”

Both consumer loans and home equity lines have increased, Garmone says. “Folks are looking to renovate their homes and do home improvement, and customers today seem to have more equity in their homes than they did seven years ago, because we’ve seen more appreciation.”

A product that has not been as attractive this year, however, is home refinancing, Garmone says.

If the 30-year mortgage rate gets up to 6%, then the housing market will likely start to slow down, he adds. But he doesn’t anticipate mortgage rates going higher than 5.25% next year.

Ryan Cuffle, branch manager at Top Flite Financial in Boardman, reports that home sales in Mahoning, Trumbull and Columbiana counties, were down 17% for the first 19 days of December with 253 homes sold, compared to the same time frame in 2017 with 304 homes.

“It’s probably rising rates,” Cuffle says. “The housing market is still good, but they’re not getting the same rates they were a year ago and six months ago.”

Nevertheless, Cuffle says there is a shortage of homes to accommodate the number of people looking to buy a home.

“I have more preapproved borrowers looking for houses than I ever had,” he says. “I’m seeing more existing property selling over new construction.”

The hottest housing markets are Canfield, Howland and Poland, Cuffle says. The average loan size that borrowers take out from Top Flite is $105,000 with a monthly payment of $850 including taxes and insurance.

Home sales for 2019 are expected to be good the first quarter with a possibility of a slow down in the spring as the Fed may raise rates again causing homebuyers to have less buying power, says Hoby Hanna, president of Howard Hanna Real Estate.

“We’re encouraging people to get their house on the market now,” Hanna says. “It’s not that rates are so high that it’s scary.”

To boost consumer confidence in a rising rate environment, Howard Hanna is renewing its focus on its program in which it stands behind the value of the properties it sells. If a buyer is not satisfied, Howard Hanna will buy back the home for 100% of its purchased price.

“Housing values are up 5% to 12% in the three counties from last year,” Hanna says. “Housing and real estate is still a good investment.”

It remains to be seen how the housing market will be impacted by General Motors closing its Lordstown Complex March 11, idling 1,600 hourly and salaried workers.

“In the short run, it creates a couple waves of panic and fear,” says Hanna. “In the long term, we’ll be okay.”

GM says it has 2,700 positions available at plants in Indiana, Kentucky, Michigan, Ohio, Tennessee and Texas, as well as skilled trades jobs across multiple locations.

Workers who decide to sell their homes and work at other GM plants will impact the local housing market in a positive manner, by adding more inventory for homebuyers, Hanna says.

“This is a great place to live, work, play and raise your family,” Hanna says. “One business deciding it’s making a change to its business plan isn’t going to turn the lights off on the area.”

Published by The Business Journal, Youngstown, Ohio.