We’re in for a very competitive stretch in the real estate market.
First of all, mortgage rates have begun to increase. The 30-year average mortgage rate is now over 4% for the first time since last summer. This comes after a long period where we saw interest rates at record lows.
Freddie Mac’s deputy chief economist Len Kiefer predicts that we’ve seen the last of sub-4% rates, thanks to rising inflation and broad-based economic growth. The bulk of this increase has occurred over just the last three or four months, during which rates have risen by nearly .5%.
Mortgage applications are also increasing. In January of this year, applications were up 4.1% year over year. This has been led by people looking to refinance their homes while mortgage applications remain fairly steady.
Our market’s current low level of inventory is another important factor to make note of. There are 10% fewer homes on the market today than there were at this time last year.
But, what do all of these numbers mean?
Due to high buyer demand, rising rates shouldn’t decrease the number of interested buyers in our market. However, the rise in rates might reduce the number of homes for sale, since rising rates leave homeowners with less incentive to list.
A 0.5% rise may not sound significant, but it truly is. A 0.5% mortgage rate increase translates to a 6% increase on your monthly payment.
Not only that, but a 0.5% mortgage rate increase also translates to a 4.5% decrease in buying power.
A buyer who could afford a $700,000 home today would only be able to afford a $670,000 home after this 0.5% rise in rates.
Fortunately, though, we can expect more inventory coming to the market during the spring and summer months. You can see all of these home listings on our website, www.imaginerealty.com, or on our mobile app.
As a final note, now is a great time to sell. If you have been thinking of listing, the current conditions make it very easy for you to earn top dollar.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.