Should you wait to buy a home since interest rates are on the rise again? It’s the third week in a row that rates have increased and puts them at the highest point they’ve been this year and many potential buyers are wondering what to do.
How Rising Rates Impact Your Home Purchase
Interest rates had been coming down this winter, but now they have started to rise again in recent weeks. The most recent weekly average 30-year fixed mortgage rate (late February 2023) reported by Freddie Mac is 6.5%. It’s the third week in a row that rates have increased and puts them at the highest point they’ve been this year. This is concerning to some potential homebuyers as the combination of higher mortgage rates and higher prices have made homes less affordable.
Indeed, at a national level, housing affordability fell in January compared with the previous month, according to the NAR’s Housing Affordability Index. Compared to the prior month, the monthly mortgage payment increased by 3.4% while the median family income only rose by 0.5%.
Why are Rates Increasing Again?
The recent uptick in rates has been driven by what’s happening with inflation. Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association (MBA), explains:
“Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time.”
Rates Will come Down Again
If you don’t like that rates have gone up and you don’t know when rates will start to come down again, should you wait to buy a house? Actually that might not be the right response right now for many buyers. This could actually be an opportunity to buy the home you’ve been searching for. According to the MBA, mortgage applications declined by 13.3% in just one week, so it appears the rise in mortgage rates is leading some potential homebuyers to pull back on their search for a new home.
So, what does that mean for you? If you stay the course, you’ll likely face less competition among other buyers when you’re looking for a home. This is welcome relief in a market that has so few homes for sale.
Remember last spring? Competing bids drove home prices even higher than the list price. Now buyers are able to take their time to make a decision, even look at the home a second time, ask for inspections and even seller concessions in some instances. This is a different market than last spring and much more buyer friendly.
It is important to remember that rates go up but they also come down. After you snag the house of your dreams at a reasonable price, you can ask the bank to refinance when rates come down. Those 2022 buyers who paid a premium of sometimes thousands of dollars to get the house of their dreams can’t go to the bank to ask that that premium be rebated.
Remember the saying – date the rate but marry the house. Keep looking for that dream house and know that you can get a good deal now and refinance later. If this sounds good and you live in the DC metro area, lets talk! Please reach out at email@example.com or 240-401-5577.