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Week of August 20, 2004 |
| Fed's rate hike hasn't affected real estate market, brokers say By Marilyn BowdenThe Federal Reserve's boosting of short-term interest rates last week had no effect on South Florida's booming real estate market, brokers say. While the price of commercial properties historically has been tied to the movement of interest rates, said Mark Gilbert, senior director of financial services at Cushman & Wakefield, "over the past three to five years, as rates moved down and stayed low for a prolonged period of time, investors in general have accepted as the norm a lower rate of return than they previously were accustomed to. We will not now see prices going up hand-in-hand with rises in interest rates." We are now entering a time, Mr. Gilbert said, when market fundamentals are rebounding. "We have some employment growth, production is going up, pricing is going up," he said, "and as a result, the rental-rate growth will be greater than what we have seen in the past several years." Rosendo Caveiro, director of Cushman & Wakefield's apartments group, said the rate change has not had any discernible effect on the multifamily investment market. "Not one investor has made a comment or shown any hesitation," he said. "One reason for that is that South Florida is a very sought-after market among investors from all over the US and other parts of the world. "One of the things that is driving the multihousing market," Mr. Caveiro said, "is condo conversion. For that reason, they are concerned about home interest rates. But they have stayed low and are even back down below 6% for 30-year money." Residential mortgage brokers agree that the Fed's announcement hasn't affected business. "Mortgage rates have actually gone down a tiny bit," said Patty Hayhurst of Hayhurst Mortgage. "But even on the commercial side, our customers didn't even blink." "Our industry is very well-prepared for any kind of increase in the fixed-rate market," said Terry Claus Jr., president and co-owner of Home Financing Center, "because of intermediate adjustable programs that give the buyer the option of having a lower rate for a fixed period of time." Interest-only mortgage programs have become more popular, he said. "People know their equity will build with appreciation," Mr. Claus said, "so they are not as concerned about the principal balance as they used to be. And there are more creative options now." For example, he said, Home Financing Center has a program called Shortcut to Home Ownership in which the real estate agent returns a portion of his or her commission to a pre-approved borrower at closing.
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