Mortgage rates rise above 5%

Posted by Liza Alley on Wednesday, April 27th, 2022 at 2:23pm

Subscribe to Liza Alley blog

For a long period of time, it was the golden age of sellers. Home prices have been soaring by up to 40% a year. Sellers were so happy watching not only their homes skyrocket but also buyers paying whatever they could to snatch it up against the next highest bidder. But sellers are now facing what all those home buyers were. Naturally, if you sell, you'll have to go somewhere and compete for that home you want.  And with such high-interest rates compared to 2020, fewer homeowners have decided to sell creating far more competition for the few remaining homes. 

Mortgage rates continue to climb up

CNN Business addresses that mortgage rates have reached their highest level in more than a decade.

The 30-year fixed-rate mortgage averaged 5.11% in the week ending April 21, up from 5% the week before, according to Freddie Mac. It is the seventh consecutive week of increases and is significantly higher than the 2.97% average this time last year.
The last time rates reached this level was in April 2010 when they hit 5.21%, according to Freddie Mac.

Homebuyers that have not been able to lock in that lower rate they had hoped for are finding themselves in a position where they can no longer afford that house they had their eye on. The mix of tight inventory and an ongoing rise in the rates has taken its toll on sales during the middle of the market.

"With the cost of financing a home about 40% higher than a year ago, demand for homes is visibly cooling, as many first-time buyers find themselves unable to qualify for a mortgage on a home that meets their needs," Ratiu said.

Market Watch mentions how mortgage rates have risen above 5% for the first time since 2011. They also ask, is the seller’s market over? 

It’s the first time since February 2011 that the benchmark mortgage product has exceeded the 5% mark. Mortgage rates now stand more than 2 percentage points higher than they were at this time last year. A year ago, mortgage rates were below 3%.

Market Watch answers the question, is the seller’s market over? "it’s too soon to declare an end to the seller’s market that has dominated in recent years. Whether home listings rebound in the coming weeks will offer hints of whether sellers are holding back. Some economists have suggested that higher mortgage rates could create a “lock-in” effect, where homeowners are disinclined to sell their current home because it would mean buying a home at a higher interest rate.

 

Are we seeing the beginnings of a change in the housing market?

Real Estate once upon a time ago

It may be hard to believe, but the good news is that rates are still historically very low. Yes, the mortgage rates are currently at around 5.11%, but throughout the 90s and 2000s, rates were sitting at a low of 7% up to 10%. This, in return, has given a lot of home buyers a lot of purchasing power compared to a long time ago. This has also given a lot of buyers some more chance to grab the house they want because it's less completive than it was this time last year. This truly may be the beginning of a change in the housing market.

Some predictions for what lies ahead in the real estate market that may affect home buyers and sellers: Price appreciation will slow, and the local market has seen tremendous price appreciation in the last two years. We anticipate that price appreciation will moderate slightly this year. After the big price boost in the spring, premium pricing may lower this summer. However, the year 2022 will end with positive price appreciation overall. And inflation will have an effect. It's also important to keep an eye on rising energy costs as well as supply chain and staffing issues, all of which could affect the housing industry this year.

Buyers' debt to income ratios will be adjusted down. It's common today for buyers to have a debt to income ratios around 44% approved by lenders. With increasing prices on everything from milk to gas to staple grocery items, lenders will want to safeguard their investments and may lower this threshold to 40-42% (And that adjustment can mean a lot to your buyers)

The good news for buyers, there may be fewer bidding wars. As buyers are dealing with the combination of increasing rates, inflation, and general uncertainty, many will be more cautious about overpaying or perceiving that they are overpaying for a home. This will allow for home buyers that are still in the game to have less competition. 

Monroe, an ongoing growing community

With the market starting to show change, the cities are still highly competitive. So, if you are considering selling in today's real estate market and questioning where you should go next, consider Monroe. In a real estate market like this, it may be wiser to consider moving further out of the city. The market may be starting to slow down, but it may still be a nightmare trying to buy in most of the bigger cities in Washington. Further, it is less competitive in the suburbs, with fewer buyers competing than in the cities. More buyers most certainly drive up the house prices, tag on high-interest rates, and you may likely not be able to afford the house you want any longer. So, consider moving out and get more bang for your buck!

 

 

 

 

Leave A Comment

Format example: yourwebsitename.com