If you’re currently hoping to buy a home, you probably know that mortgage rates are sharply on the rise. The result of this rapid increase, according to economists, is a noticeable economic shock. Unfortunately for many homebuyers, rates recently saw another significant boost, going from an average 30-year fixed mortgage rate of 4.42% to 4.67% in just one week. A few months ago, in December, the average rate was only 3.11%.
In a sellers’ market with incredibly high demand, this swift upward trajectory is definitely going to have an impact. Lenders are known to have strict debt-to-income ratios. A hike in interest means higher mortgage payments, which is likely to mean many buyers will no longer qualify despite the fact that they may have just weeks ago. Others may walk away from the market due to current conditions, dissuaded by these higher costs. To put the numbers in perspective, consider a mortgage amount of $500,000. At the 3.11% rate, monthly payments would be $2,138. That jumps up to $2,584 with a rate of 4.67%. Over the course of a 30-year loan, a borrower would be paying an additional $160,698. No wonder some buyers are reconsidering whether now is the time to purchase a home.
Real estate experts in the know say there isn’t a need to panic. They don’t believe that a housing crash is inevitable. Rather, they believe that today’s increasing rates may just be the catalyst that’s needed to level out the market. It’s possible that current lows in available inventory will begin to increase if there are fewer competing buyers. The number of homes on the market is well below pre-pandemic numbers, 48% below. It’s the hope of industry experts that even a slight increase will help to halt the rise in housing prices that are simply unsustainable.
Because current market conditions are so volatile, many believe that higher interest rates could actually be quite beneficial. These rising interest rates may just be what is needed to bring stability to the current unhealthy situation.
One reason we have yet to see a change is that the most recent surge of buyers was lucky enough to lock in January or February rates. The shift should begin to occur as higher interest rates are implemented with upcoming crops of homebuyers. With rates approaching 5%, the urgency to buy is less likely to be a factor, and more prospective buyers will realize that housing costs are out of their budget.
Over the next several months, the elevation of home prices should start to slow down. Limiting such inflation has been a goal of the Federal Reserve all along, which is why it has been emphasizing higher interest rates. Currently, outrageous housing market conditions have seriously contributed to general price growth throughout the nation’s economy. Some banking insiders are concerned about a housing bubble if things don’t improve.
With the upheaval we see in today’s housing market, now is a great time to seek the help of a qualified real estate agent in Estes Park. You’ll want a trusted guide to assist you in this tumultuous landscape.
