The prospect of rising interest rates may give some in the housing industry the jitters, but the new president of the Home Builders Association of Greater Toledo predicts higher rates will be good for business.
"They're rising incrementally," said Tim Schlachter, who was to take over yesterday as head of the 600-member organization. "The underlying reason is good. The economy is picking up steam. Interest rates were artificially low to push the economy along."
But a revived economy -and hoped-for improvements in the job market -will put more people in the position to buy, he said.
Despite concerns about the costs of borrowing, oil prices, and terrorism threats, industry representatives predict another strong year for sales of new and existing houses and for housing starts locally and nationally.
The National Association of Realtors predicts that sales nationally will "taper off" slightly in 2005 to 6.3 million from an expected 6.6 million this year for existing homes and to 1.1 million, down from 1.2 million, for new homes.
Still, even the downsized figures would be near records.
Housing starts, meanwhile, are forecast at 1.8 million, down from 1.9 million this year.
The reason for the decline, said Lawrence Yun, an economist with the Realtors group, is that mortgage rates will begin to rise gradually after shrugging off a series of Federal Reserve Board-imposed increases in shorter-term interest rates this year.
He said he expects average rates to rise to 6.5 percent from just under 6 percent now.
But Ohio could fare better than the nation overall, he predicted, because "Ohio has seen some of the most severe job cuts."
If an improving economy leads to job growth, "Ohio could be in a better position than other parts of the country."
Sally Wylie, new president of the Toledo Board of Realtors, is optimistic about the upcoming year.
The local housing market's performance in November and December has helped cement that optimism.
"It's been very strong for this time of year," said Ms. Wylie, a sales agent with the Danberry Co. who specializes in western Lucas County and Fulton County.
Nearly 1,200 single-family houses were sold in 2004's final two months through last week, she noted. "There's always that unforeseen, but everything looks positive," she said.
The sales agent conceded that rising interest rates could have a psychological impact on buyers, but added that "it's all about educating the public."
She can recall when mortgage rates were at 18 percent and said current rates are relatively low.
First-time buyers are a huge part of the local market, she noted.
Although they will be most susceptible to rising interest rates on mortgages, the impact could be reduced by a number of programs to assist such buyers, she said.
Mr. Schlachter, a custom-home builder who operates Buckeye Specialty Homes in Sylvania Township, said he expects housing starts to rise by 5 percent in 2005.
He bases that prediction on strong momentum entering the year and the psychological impact that rising mortgage rates could have.
"As people see rates rise, they will get the idea that now may be the time to make a move if they're in the market."
Locally, he said, greatest demand has been for houses in the $175,000-to-$225,000 range.
Tougher sells, however, are homes in the $325,000-to-$450,000 bracket, especially those built on "speculation" without a buyer lined up.
"The big companies like Owens Corning, Dana, and Owens-Illinois aren't transferring people in and out of town like they used to, so it's slowed the market down a little."
He cautioned, however, there could be pitfalls.
They include spikes in building materials, such as one this year that briefly more than doubled the cost of fabricated plywood. Prices have since moderated. But a prolonged price rise could hurt the industry.
He said the list of commodities to watch includes oil, which is a component in vinyl siding and many other building materials.
"With interest rates historically low and the economy picking up, short of some type of large terrorist attack or huge defining event, I don't see anything standing in the way of 2005 being a very good year," Mr. Schlachter said.
Contact Gary Pakulski at: email@example.com or 419-724-6082.