What Impact Will the Fed Rate Hike Have on the Red Hot Local Housing Market?

So will yesterday's increase in interest rates cool off the region's red hot housing market?

The quarter point interest rate increase approved by the Federal Reserve Board on Wednesday, along with a rate hike okayed last December, has the potential to push up the cost of what today is a $1,000 a month mortgage payment by $40 to $50 a month.

But economist Jim Gaines, who heads the Real Estate Center at Texas A&M, says mortgage rates remain low, at least for now.

"Its still hovering somewhere in the 4 1/8 to 4 1/2 percent range," he said.   "That is still, by historical standards, an extremely low rate."

The local housing market has been red hot for the past few years, and, with starter home sales the lowest in decades, that is pushing up the price of an existing home to a record high.  Last month's average sale price of an existing home in the metro was about $235,000.

Gaines says the two factors combined could cause would be buyers to think twice.

"It will affect a few people right on the margin, but it is still an affordable rate, and a rate that most people can afford to do in terms of buying a house," he said.

But Fed Chair Janet Yellen indicated that 'two or three' more interest rates could be on the way before the end of this year, and that could push the rate to the point where a significant number of buyers are priced out of the market.

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