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Published June 27, 2022
Marry The House, Date The Rate
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Over the last 30 days, interest rates have been on the rise but prospective home buyers are not slowing down!
The Fed is expected to raise interest rates further, possibly by as much as a half of a percentage point! So… how will this affect the housing market? The 30-year fixed-rate mortgage averaged 5.81% in the week ending June 23, edging up from 5.78% the week before, according to Freddie Mac.
So what does this mean for our home buyers? We say “Marry the House, Date the Rate”! Within time, interest rates will even out and you will be able to refinance on the home that you purchased. Why wait to purchase your dream home, when you know that rates aren’t forever!
This is IMPORTANT. If you have been pre-approved in the last 30-60 days, please reach out to your preferred lender and check your rates. The mortgage payment you thought you were going to be paying, has more than likely increased. This allows you time to adjust and look for homes that make sense for your budget.
Raising rates is designed to help lower the demand for mortgages, by making them more expensive for prospective homebuyers. The question that remains is while rate hikes appear to be working to lower mortgage applications, will this have an impact on soaring home prices?
According to Nadia Eveangelou, senior economist and director of forecasting at the National Association of Realtors (NAR), the answer is no. “We expect home prices to keep rising. We [would normally] expect higher mortgage rates to lower housing prices, but I don’t see that happening—we will see lower demand, but not necessarily lower prices.”
The most recent data for both pending home sales and mortgage applications show a weakening demand from home buyers. The combination of high prices and high interest rates have made purchasing a home significantly less affordable, and it’s likely that some families have been pushed out of the home-buying market—at least for the time being. (realtor.com)
A year ago, a buyer who put 20% down on a median-priced $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 3.02% had a monthly mortgage payment of $1,673, according to numbers from Freddie Mac.
At today's rate of 5.81%, the monthly mortgage payment on that same house would be $2,187, a difference of $514. (cnn.com)
Homebuyers should know that housing prices should slow down a bit in the coming months. It’s not expected that they’ll completely fall, though. It's more likely that high prices will continue and that even steeper rate hikes aren’t going to be enough to overcome the amount of buyers willing to waive contingencies and pay premium prices to secure a home.
Those who persist, could be rewarded with a less competitive market, which could give them more homes to choose from and a lower likelihood of facing a bidding war. The demand is strong and will remain strong due to the buyer pool being deep.
So remember…marry the house you love during this market and date the rate.
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If you’ve been debating on whether now is the time to sell your home or you are just curious about the current market conditions in our area - give us a call! Our team of experts are ready to help you make the best possible choice for you and your family!
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Blog Sources:
Realtor.com
FastCompany
High Frequency Economics
Updated information 7/14/22
