Rate hikes could finally slow hot North Westchester market.

After enjoying favorable interest rates for nearly ten years, recent and persistent increases by the Federal Reserve inching, rates closer to the 9.5-10 percent mark finally slow the here to fore unstoppable housing market in Dutchess, Putnam and Westchester Counties.

The Fed has already instituted five quarter-percent rate hikes since last June. And with yet another increase expected later this summer, homebuyers and developers alike throughout the region may begin holding off on making decisions now which could adversely impart housing sales in the second half of 2000.

It seems fairly certain that the majority of buyers who are already involved in the homebuying process will complete them purchaser and hope to refinancing their mortgages should rates decline again. But what will be the fate of buyers who are just getting into the housing game; or expect to in the near future?

Prominent industry leaders in the region believe there are two diametrically opposed schools of thought that can be applied here. One is that higher interest rates will frighten buyers sufficiently to force a decision against purchasing a homer at all. The other sees buyers acquiring homes as fast as they can to avoid even higher mortgage rates later in the year.

Unfortunately, for those charged with assessing the future of the housing market, either opinion-cou1d turn out to be correct. And since feelings seem evenly divided on the issue, the impact of higher rates on homebuying is very uncertain.

For real estate developers, the recent rate hikes have also created significant hesitancy over whether or nor to invest in new home communities.

A number of considerations come into play here. First, interest-rate increases historically have resulted in a concurrent rise in the cost of land. Combine this with inflationary conditions, which have ballooned the cost of building materials, and its is easy to see that it is becoming increasingly more expensive to construct new homes.

Secondly, the interest-rate hikes will escalate previously favorable monthly mortgage payments. Until now, monthly mortgage payment son a $250,000 home were comparable to payments on a $350,000 home, but the recent rate increases mean that the more expensive the home, the harder the monthly payments will be. As a result, some developments may be forced to lower home prices to lessen the burden of buyers' monthly mortgage payments.

Should a decline in prices coincide with a rise in construction costs, developers may be less inclined to embark on new home ventures which do not seem profitable. This could result in a decrease in the number of new home communities coming on stream in the upcoming months.

Yet these same factors may also prove to have a positive effect on the region's housing market in the ling run. With home sales flourishing over the past several years, consumer confidence consistently pushed the price envelope to its limit, forcing many buyers out of the market. Now that indications point to a cooling off period, prices could also level off or perhaps even come down a bit.

Thus, there may be new housing opportunities created for the future from the conditions that slow sales now.