RENEE MONTAGNE, HOST:
OK, we've been hearing prediction after prediction that the Federal Reserve will raise interest rates. This week, though, seems to finally be the week. If they do go higher, those interest rates will be visible to most Americans in the form of higher mortgage rates. NPR's Chris Arnold has this look at the housing market.
CHRIS ARNOLD, BYLINE: Some people who are watching interest rates very closely - home builders. That's because this 100-year flood of a housing crash has been especially tough on that.
So I guess this is in here is going to be the living room?
DE DESHARNAIS: Yeah, exactly. So we have a big, eat-in kitchen. And this will be a two-story living room, so it's wide open to the upstairs.
ARNOLD: De Desharnais is a homebuilder in Nashua, N. H. She's walking me through a half-built house that her crew is putting the siding on. Desharnais says she's lucky - her company survived the crash. But it's been painful.
DESHARNAIS: We had 32 employees on our payroll at normal times. We have six on our payroll right now.
ARNOLD: Still, really?
ARNOLD: The housing market has definitely improved over the last few years. But Desharnais says homebuilders like her can't help but be a bit nervous about the prospect of the Federal Reserve raising interest rates. That's because if mortgage rates were to rise by a lot...
DESHARNAIS: People are out there finally buying. So builders like us that have been around a long time, we have big subdivisions that we've been carrying through that recession. I think there is a big concern if the interest rates go up that everything is going to come to a screeching halt.
ARNOLD: But actually, she says, most homebuilders don't think that's what's going to happen. The Fed's been signaling that interest rates are going to start rising, but very slowly. And some of that's already baked into today's mortgage rates. Also, Desharnais says she doesn't see any rush by homebuyers to buy before rates go up.
DESHARNAIS: I'm actually a licensed realtor as well. And no, people aren't out there going, jeez, we've got to hurry up and do something because the rates are going to increase. There's no sense of that within the real estate community at all.
ARNOLD: Some economists, though, think that people who want to buy a house should have a greater sense of urgency. John Burns runs a national real estate consulting firm. He says mortgage rates are expected to rise by about one percentage point over the next several years. And that would mean that the same-priced house will cost you 12 percent more in monthly payments.
JOHN BURNS: So if mortgage rates go from four to five, payments are going to go up 12 percent. That'll hit affordability hard. And I don't think that message has really gotten out there to people that they understand they should take advantage of where rates are today.
ARNOLD: Also, Burns says it's once again become easier than many people think to qualify for a mortgage. He says that some of the biggest banks are not so eager to make home loans. But...
BURNS: ...There's a lot of non-banks like Quicken Loans and loanDepot that are taking a lot of market share from the banks. So as long as you can provide the income, and you are not, say, below a 660 FICO score - which is about a bottom 30 percent of the country - they can get you a mortgage relatively affordably.
ARNOLD: As we look ahead to next year, one big question is whether first-time homebuyers will finally return to the market. William Wheaton is a housing economist at MIT. He says millennials just aren't settling down to buy houses like people have in past generations. A big issue there...
WILLIAM WHEATON: The absence of marriages.
ARNOLD: Wheaton says people 20 to 35 years old - if you look back to 1980, 1990 and 2000 - the share of households of that age that had never been married was about 30 percent. In the 2010 census, though, it was twice that - 62 percent.
WHEATON: That's just an enormous change. These people are not getting married. I don't know why. That's a really interesting question.
ARNOLD: And Wheaton says it's a question that has big implications for the future of the housing market. Chris Arnold, NPR News, Boston.
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