The talk of the real estate market these days is all about mortgage rates.
Even though mortgage rates are still way lower than they were back in the 1980’s, they are higher than they have been in recent years. In fact, rates have more than doubled over the past year, and according to the Federal Home Loan Mortgage Corporation (“Freddie Mac”), that’s the first time in history that rates have more than doubled in just a year.
Rising rates are intended to address inflation in the economy. Generally speaking, when it gets more expensive to borrow money due to higher interest rates, people will spend less because they have less money to borrow, and decreased demand tends to force prices down.
In the context of the real estate market, many home buyers would feel a sense of relief if home prices start to retreat from the high prices we’ve seen recently. But the trade-off is that rising rates reduce purchasing power for those looking to buy a home. Similarly, it can affect sellers because of the decrease in prices – and, of course, many home sellers are soon-to-be buyers themselves.
So, how do you navigate this real estate market?
If you’re a buyer looking to purchase this spring, it’s best to start talking to your financing agent as soon as possible. If you pre-qualified for a loan before, make sure you get your estimates updated so you are confident of your price range in today’s market. Also, you should ask your financing agent if there is anything about your personal financial situation that you should address before you buy to make yourself a better candidate for a loan and to thereby potentially qualify for a better rate or more-attractive loan program. The housing market remains very competitive for would-be buyers.
If you’re a seller thinking about listing, it is best to be realistic about pricing in today’s market. While prices are still strong in general, they have retreated modestly from the high points we saw in some markets last year. Make sure you’re dealing with updated information about the current real estate market when setting expectations for selling.
As always, if you’re looking for advice… feel free to reach out to us!