ONTARIO – Surging mortgage rates and high home prices are intensifying pressure on the Malheur County real estate market as mortgage brokers grow concerned would-be homebuyers are getting squeezed out as mortgage rates hovered at 7% last week.
Kara Currey, branch manager at First Colony Bank in Fruitland, said about six months ago, the average interest rate for a 30-year fixed $350,000 mortgage was at 4.5% in May, with monthly payments working out to $1,773.40.
Interest rates on that same type of loan jumped to 6.95% as of Thursday, Nov. 3, bringing the monthly payment to $2,316.82.
Currey said the Federal Reserve’s rate hikes are intended to curb inflation. On Wednesday, Nov. 2, the Fed boosted the interest rate for the fourth time this year by three-quarters of a percentage point. The rate in March was near zero.
An industry veteran, Currey said the combination of high home prices and record-high interest rates is unlike anything she has seen in her nearly 25-year career. When she purchased her first home, her interest rates were close to 20%. The difference then, she said, was that homes were around $60,00 to $70,000.
She said the Fed is likely to raise the rates again in December. Fed Chairman Jerome Powell alluded to another rate hike during a Wednesday, Nov. 2, press conference.
“We still think there’s a need for ongoing rate increases,” Powell said, “and we have some ground left to cover here and cover it we will.”
Meanwhile, Currey said, the housing market is slowly cooling down. The median price for a home in Ontario as of October was $335,000, according to data from Realtor.com, down by 1.4% from a year ago. Additionally, according to the data, there were 80 active listings of property for sale, up 3% from a month ago.
“The housing market is going to slow, to a very slow but quick recession,” Currey said. “And nobody’s going to be able to afford a home.”
At some point, Currey said, the Feds will have to pull back the reins and lower the rates to pull the housing market out of what, she said, is a housing recession.
Currey said the current situation is nothing like the housing recession in 2008.
The 2008 housing meltdown, caused by lax lending standards and inexpensive credit, fueled a housing boom that peaked in 2006 and went bust in 2008, leaving banks with trillions of subprime mortgages and worthless investments. As a result, millions lost homes, jobs and retirements as the U.S. headed into the Great Recession of 2008.
“It’s a very different housing recession that I see,” she said, “but we are there for sure.”
According to economists, a housing recession occurs anytime home sales decline for six consecutive months. With that, the housing market is – by definition – in a recession.
Marty Justus, real estate broker and owner of Four Star Real Estate, said the housing market is indeed seeing a downturn.
Justus said he does not anticipate drastic home foreclosures because those who bought their homes before the rate hikes are paying reasonable monthly payments. Moreover, he said, those who have received mortgages in the years since the housing market crash of 2008 qualified for their loans.
According to Justus, the run-up to the 2008 housing crash was a different story.
“(Most lenders) were giving away free money to people who didn’t qualify,” he said.
Home prices, he said, have been steadily increasing since 2012, and the housing market has been due for an adjustment. The market, Justus said, runs on a 10-year cycle.
“It goes up and down,” he said.
While the slowdown means he will not sell as many houses for the foreseeable future – six months to a year – he is not worried about a market collapse.
Like Currey mentioned, Justus said the Fed keeps raising the interest rate to stabilize prices.
“If everybody keeps spending like it’s Saturday,” Justus said, “prices are not going to come down.”
Regarding the number of homes being built, Eric Evans, Malheur County’s planning director, said his office is staying busy, but, he said, it is likely because the homes being built were financed at lower rates or they are being built without financing.
Adele Schaffeld, Malheur County Building Department director, said her office, which issues building permits to every part of the county except for Ontario, said her office had issued roughly 1,700 building permits this year. She said October was a record month, with the department issuing 158 permits.
Like home sales, Schaffeld said building runs on a 10-year cycle and Malheur County has been running on a high for 15 years.
“I would expect to see a downturn,” she said, “but then again, I was expecting (a downturn) last year. But I would not expect it to be like 2007 or 2008.”
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