Higher Interest Rates Challenge Reno Homebuyers - KTVN Channel 2 - Reno Tahoe News Weather, Video -

Higher Interest Rates Challenge Reno Homebuyers

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For Chase International Real Estate agent Megan Lowe, these are the gravy years. Reno real estate has come back to life…people are hunting for homes. What could stop the party? Rising interest rates, and buyers are already reacting. As she told us, "People kind of back off, because they want to see where it is really going."

Where it's going is the wrong direction. Low, low interest rates would keep Reno's buyer fever going, and maybe jump start some of the stagnant new home construction projects in town. But interest rates jumped in June when the Fed talked about phasing out those stimulus bond buys. The rate on a 30-year fixed has now jumped to its highest level in 2 years.

A chart from Zillow tells the story: the average rate on a fixed, 30-year mortgage started ticking up from a low-point 3.35% in May. What followed is a dramatic jump in June, all the way to 4.6 percent the first week in July...enough to where rates have overtaken price gains as the top concern among buyers, but not enough to scuttle any sales for now. Lowe told us, "Homebuyers at first, when we had that large spike, they were kind of nervous. But in meeting with their lenders and in crunching the numbers they weren't as worried."

But recently, the higher home prices have only added to the cost. Median single family home prices in Reno-Sparks spiked from $170,000 in June 2012, to $222,000 for June 2013...a 30% rise in just 1 year. Higher interest rates add to those higher payments. For that $222,000 median price point, Lowe said the interest rate jump would add "probably like $75 to $100 more a month, if it went up a point." For a $400,000 home, the added interest point means another $150 to $200 a month.

Currently, rates on the 30-year hover between 4.3% and 4.6%. But Megan says in the big picture, those rates today are still very low: "I think interest rates aren't going to shoot up. I know they're not going to go down. But I think 4.5% is the plateau where they're going to hang out, and I think that's a great interest rate."

She says most buyers will reconsider once they hit 6%.

-written by John Potter

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