Hey, everybody! It’s Wednesday! It’s time for your Humpday Market Update for the week!
If you’ve been paying any attention to the news, and certainly if you’ve been wanting to buy a home, you’ve heard about how drastically mortgage rates have increased this year! But where do experts think they’re going now that the market has cooled off? The good news is that the experts seem to agree that mortgage rates will stabilize in the fourth quarter of 2022 to an average of 5.4%. These same experts also agree that rates will be back in the upper 4% by this time next year! After watching interest rates climb over 2% this year to combat inflation, it’s nice to know that things will stabilize and give buyers some certainty. Whether you’re looking to buy your first home, upgrade, or downsize, make sure you’re working with a real estate professional who will educate you on the market and keep your best interest in mind.
The news that rates will stabilize relieved me as a real estate professional, homeowner, and investor. Many of us are sitting on beautifully low interest rates (due to a global pandemic), which makes it very difficult to swallow where they are now and keeps us locked into our current mortgage and home. So, it’s nice to know that they will not get as high as some feared they might. (I heard as high as 8% at one point.) It seems the 2% that they increased this last year had the effect the Fed wanted. It will be interesting to see how August inflation numbers look. As long as it comes down under 8%, hopefully, all of these predictions about interest rate stabilizing remain true. The truth is, nobody knows. These are expert opinions or educated guesses – but nobody really knows. There are no crystal balls in real estate and economic predictions (unfortunately, I would buy one). This positive news creates confidence, which is a big part of our economy. Some would say consumer confidence is probably the most significant factor, and then comes money. :: insert laughter:: If inflation was 8.5% in July and 9.1% in June, as long as August is under 8.5%, we are moving in the right direction!
The above graphic shows the information I referenced today. You can seethat Freddie Mac, Fannie Mae, MBA, andNARgive their one-year interest rate predictions. This is typical interest rate activity when entering and coming out of recessions. I believe we will go into a recession (if we aren’t already in one), but it will be a short one to accomplish the goal of fighting inflation.
One of the essential things about interest rates and pricing is that they tend to offset each other. So, the lower interest rates, the more affordability somebody has. And a higher interest rate, so less affordability that they have. When people primarily rely on a monthly payment to set their budget, the lower the interest rate, the more house they can afford. But as affordability goes down, so, therefore, will home prices because if a $600,000 buyer now can only afford a $500,000 house, the housing market will have to respond to that. If you’re looking for that sweet spot or to time the market, why not buy the house now while increasing interest rates offset purchase price prices and then refinance and the quarter when they fall back down into the fours?