The Gulf Shores housing market has been anticipating a possible interest rate hike by the Federal Reserve Bank. Analysts say a small interest rate hike will have little effect on housing activity. In fact, there are other components that are more telling that could impact Gulf Shores housing.
What to Look for in the Gulf Shores Housing Market
Some industry insiders say the only potential threat that may exist as a result of a rate hike would be the effect it has on credit standards for buyers trying to qualify for a mortgage loan.
First time home buyers could potentially see loan qualifications tighten as those credit standards change. The tighter credit policies have typically been implemented to guard against a repeat of the housing crisis from less than a decade ago.
In the years preceding the last housing crisis, the Gulf Shores housing market included borrowers that had bought beyond their abilities to repay. When the economy weakened and unemployment rose the market quickly saw how home values were artificially inflated.
There is concern among some analysts that three factors continue to plague the housing industry — despite activity and sales being the highest in the previous eight years.
1. The recent psychological shift among Millenials to become more urban, city dwellers instead of suburban homeowners.
2. The fear that Fannie Mae, Freddie Mac and the FHA are returning to their old ways with low down payment requirements that may lead to higher loan-to-value (LTV) ratios. Still, other real estate analysts say as the younger Millenials have children the trend seems to be changing as they seek better schools and other attractive features of suburban living.
3. The unemployment rate. Jobs are more of a Gulf Shores housing market indicator that other factors. Housing is strong where there is lower unemployment. The rule of thumb is a high employment rate, the slower the housing market.
Lastly, the main reason there seems to be little fear that a rate hike may affect Gulf Shores housing is in dollars and cents. A 1/4 point rate increase on a $250,000 mortgage only increases the monthly payment by roughly $35. Experts say it usually takes an increase of a full percentage point to make a noticeable affect on consumers.