In recent months I’ve been in contact with several buyers that we’re pretty shocked at their interest rates. Some decided to pull the trigger and buy, others decided that they’d wait a few months and stockpile some extra down payment money to offset the higher rate on a monthly payment level. Thing is, the longer buyers wait the higher their interest rates go, so that monthly savings won’t necessarily come about. Historically speaking, money is still cheap to borrow. Some of our parents bought homes at 19% interest, and in the 90’s and early 2000’s they averaged between 5-7%. But for people used to rates in the 3’s for the last several years, a bump into the 4’s is shocking…and it’s only going to get worse as the Fed fights against inflation and an overheated economy. So if you’re someone that’s been kicking around the idea of buying, NOW is the time. And if you’ve been thinking about selling, it’s DEFINITELY a great time to sell! Our inventory levels are down 10% vs last year and the market is absorbing almost 40% of the listed homes every month. Demand is high, inventory is low, and rising rates will affect consumers ability to buy and may have an adverse affect on what your home is worth.
The National Association of Realtors recently published a piece that I felt was valuable to share, and as always I’m happy to help you buy OR sell in today’s market!
Rising mortgage rates could have a big impact on the direction buyers go when shopping for real estate, economists warn.
“Every time the interest rates go up, you eliminate a group of people who can no longer afford to buy a house,” says Don Frommeyer, a mortgage broker at Marine Bank in Indianapolis. “Some people may have to rent for a period of time until they make more money – or buy a smaller house.”
To avoid further complications to their plans, buyers may want to speed up their home search this spring, as interest rates are forecast to move higher in the coming months.
Forty-four percent of home buyers say rate increases will likely force them to settle for a smaller, less expensive home that requires a longer commute to their jobs, according to a realtor.com survey; and first-time buyers may be most affected by rising costs as increasing home prices and interest rates price some out of the market.
Mortgage rates are at their highest levels in more than four years. The 30-year fixed-rate mortgage averaged 4.46 percent last week, according to Freddie Mac, and that’s largely expected to increase since the Federal Reserve said it’s likely to raise its short-term interest rates this year. That could prompt mortgage rates to move higher at least three times this year, starting this month.
“For the bulk of buyers, it’s not going to kill their decision to purchase a home,” says Rick Palacios Jr., director of research at John Burns Real Estate Consulting. “If anything, it will get them off the fence by creating a sense of urgency.” Higher rates are “a kick in the pants for you to start thinking seriously [about buying].”
Rate increases – even minor ones – can add up over time. Realtor.com offers this example: On a $300,000 house with a 30-year fixed-rate mortgage and 20 percent downpayment, the difference between a 4 percent and 5 percent mortgage rate is $142 a month. Calculated over the life of the loan, that is more than an extra $51,000.
“Buyers thought they could wait forever because rates were going to stay low forever,” says Palacios. “They’re starting to realize that if they’re going to buy, they should probably buy now.”