Climbing interest rates spur some SoCal homebuyers to action

From how much his phone has been ringing, Glendale home loan consultant Shea Case could pick up on the anticipation around the Federal Reserve's decision to raise interest rates today.

"Just the last week or two, I’ve had an uptick in phone calls from home borrowers looking to refinance their home or lock in their purchase mortgage to safeguard against the increase in rates," Case said.

The Fed's decision to raise the federal fund rate by a quarter-point was not a surprise, least of all to prospective home buyers who have been budgeting for a house and paying attention to interest rates. Though the Fed's key interest rate does not directly lead to a rise in mortgage rates, it does influence the rest of the financial market, including home loans.  

The looming rate hike created some urgency for homebuyers, according to real estate experts. Real estate agent Rick Cunningham said in California, homebuyers are already more sensitive to interest rate hikes because housing costs are higher here, meaning average loan payments are bigger to begin with.

Cunningham, who owns multiple Keller Williams Realty Inc. locations throughout California, said that lingering memories about the recession also has consumers feeling tight-fisted.

"It’s still relatively fresh," Case said. "A lot of people saw a lot of their friends, families or themselves lose considerable amounts of their net worth, whether it was in real estate or stocks."

Cunningham says he just refinanced his home in anticipation of the Fed rate hike. If that’s makes you feel behind the eight-ball, it shouldn’t.

Interest rates are inching up from historic lows, and Federal Reserve Chair Janet Yellin stressed that the growth will be slow. 

But Stephen Oliner, a senior fellow at UCLA's Ziman Center for Real Estate, said don't dally too long. He expects the Fed to raise its interest rates multiple times over the next several years.

"The cumulative effect of all those rate increases is going to push up all long-term rates," Oliner said. "It's going to have an effect on affordability, particularly in areas that already have very expensive home prices, like the Southern California area."