The days of record low Gulf Shores mortgage rates have apparently come to an end as fixed-mortgage rates hover around 4%. And while there are many saying that rising rates won't hurt the housing market, others are more concerned.
Many analysts seem to agree that if Gulf Shores mortgage rates rise much more above where they are now, affordability could begin to take a toll. This is especially true with first time home buyers and investors, which combined, make up a large part of the home buying market these days.
Speed of Rising Gulf Shores Mortgage Rates the Biggest Concern
Fannie Mae Chief Economist Doug Duncan said the concern should be less about what the rates have risen to and more about the speed at which they are rising.
Duncan noted that in 1994, for instance, rates rose 2% over a 12-month period, resulting in a huge impact on home prices, which fell significantly.
"If the rise happens rapidly, it tends to have an impact," said Duncan, who added that once Gulf Shores mortgage rates rise 100 basis points, home sales may begin to slow.
As far as first-time homebuyers go, Duncan said it all depends on how high the mortgage costs go. "It's all about the size of the mortgage that they're going to try to take on relative to their financial strength," said Duncan.
Overall, first-time homebuyers are making up about 30% of total buyers, said Duncan.
High investor activity is making up the difference, he added. "If investors fell off, would first-time buyers be bigger?" asked Duncan.
A lot lies on that very important "if," according to Duncan. If investors start to back out, you'll likely see prices flatten out.
"We do believe there is going to be a slow down," said Duncan.
But Duncan added, "We're not up to the average long run mortgage rate that the economy has seen over all those years." From World War II to today, the average 30-year fixed-rate mortgage is about 6.5%, according to Duncan, who noted, "People have forgotten that there were mortgage rates at the 14% and 15% range for awhile."
Even though Gulf Shores mortgage rates have risen pretty quickly and significantly, they were from a very low level — the lowest level since World War II — so we're not even close to the average 30-year fixed-rate mortgage rate. The greater concern overall is not the level of the Gulf Shores mortgage rates, but the speed at which they rise.