Addresses Critical Factor in State of Housing Market
From a stalled homeownership rate to uncertainty out of the White House, the real estate industry is facing a host of challenges and opportunities informing the future of the business, and the market. One critical factor, however, according to Gary Keller, co-founder and chairman of the board of Keller Williams Realty, isn’t cause for alarm—in fact, it’s the opposite.
“These are good times,” Keller shared at the Keller Williams’ Family Reunion conference in Las Vegas on Tuesday, citing rising mortgage rates. “You may not feel like they’re good times. These are really good times.”
More than 100 housing experts recently surveyed by Zillow said rising mortgage rates stand to have the most impact on housing, underscoring a general concern about their effect on housing affordability. Rates are currently hovering around 4 percent, and the Federal Reserve intends to raise the key interest rate three times over the course of 2017.
Keller pointed to historical data: the federal funds rate was 19.1 percent in January 1982, compared to 0.65 percent as of January 2017; the average mortgage rate historically is 8.3 percent, compared to the 2016 average, 3.65 percent. Those bottom-of-the-barrel figures, according to Keller, are too low—and raising rates is necessary.
“What determines affordability? Price, income and interest rates,” said Keller. “Home mortgages in the U.S. took 21.6 percent of someone’s income historically. Where are we today? Flat over the last year—but look back to 1980, 1981, 1982. Look how low it’s been.”
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