Kelly Crowther
Mortgage rates have fallen to a 13-month low, and buyers are taking advantage of the opportunity. Particularly, the low interest rates have fueled activity in the home market. According to research from Freddie Mac, mortgage interest rates fell to 4.3% in March for a 30-year fixed rate structure. Now, homebuilders are emphasizing the low interest rates in marketing tools, and sales at home communities have increased, especially for new millennials.
“We are starting to see the lower interest rates attract people that were sitting on the sidelines,” Kelly Crowther, sales manager at Loan Depot, who originates loans for Brookfield Residential in Southern California, tells GlobeSt.com. “Where previously some had been in a wait-and-see stance, they are now re-entering the market. This is especially true in communities such as New Haven, developed by Brookfield Residential in the Ontario Ranch masterplan. Here there is a wide-range of entry-level homes attracting buyers, including a large share of millennials and other first-time buyers.”
The Federal Reserve has already announced plans to ease its quantitative tightening strategy, so rates could remain low through the year. “I expect that interest rates will remain flat or could possibly even improve a bit this year,” says Crowther. “The Federal Reserve continues to indicate that it will hold interest rates steady.”
Last year, the increase in interest rates had a significant impact on home sales. In California, Los Angeles and San Francisco both had an extreme decrease in home sales starting in April. “Interest rates were climbing but the demand was still there. The second half of the year saw the sales activity dwindle significantly,” says Crowther. “I believe this was a combination of rising interest rates and home prices creating affordability issues. But even then, entry-level sales remained strong in places. Ontario Ranch, for example, was ranked by RCLCo as 2018's number-six best-selling masterplan community in the nation, with 1,005 sales.”
As interest rates have come down, home sales this year rebounded and should stay strong through the end of the year, as long as interest rates remain low. “I actually believe the second half of the year will be even busier than we saw in 2018,” explains Crowther. “California, especially in the coastal regions, still suffers from a drastic housing shortage, which is at crisis levels in some areas. In that crucial sense, demand remains strong. These interest rates are at historically low levels, so many would-be buyers understand they still have time to take advantage of that and comparing deals from various homebuilders. And some builders are responding creatively. Brookfield Residential recently bought a $15 million forward loan commitment through Loan Depot to offer lower interest rates. It was used up by buyers in under 60 days.”
Home sales at Brookfield's Ontario Ranch community have increased as a result of the lower rates. Now, the property is ranked number six for home sales in the nation. Lower rates are also helping buyers to afford higher price tags. “Interest rates and home prices are essential parts of the affordability equation. This is increasingly a challenge in the Southern California market,” says Crowther. “But as we have seen in the past, lower interest rates have had a favorable mitigating impact on rising home prices.”
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Kelsi Maree Borland
