The Federal Reserve’s long-term interest rate reduction has led to the lowest 30-year fixed-rate mortgage rates since 1971, when rates first began being tracked. But a New Jersey real estate expert said not to expect the 4.01 percent rate to cause a major effect on the housing market.
Jeffrey Otteau, president of the Otteau Valuation Group, in East Brunswick, said in theory, lower interest rates on mortgages makes home ownership more affordable, and should increase demand in the housing market.
But “a homebuyer who is not convinced that now is the right time to buy at a 4 percent interest rate is likely to feel the same way at 3.5 percent,” Otteau said. “That tells us that there’s other stuff going on in your mind that is keeping you back.”
Otteau said factors such as fear of job loss, low credit scores, high rates of foreclosure and default, and concerns that prices will continue to decrease all prevent buyers from feeling urgency.
Otteau also said the reduced mortgage rates create a “double-edged sword,” because first-time homebuyers who are encouraged to enter the market are still likely to have low credit ratings and little to no down payment saved.
“Housing affordability today is already at 112 percent in New Jersey,” Otteau said. “That means that someone earning median income has more than enough earning power to be able to afford a median-priced house. … Affordability is not the problem in the housing market.”