Prices & Rates

Housing prices and interest rates aren’t going back down!

Mortgage rates surged to the highest level in two years, leaving homebuyers on high alert as further increases loom. Things aren’t going back down. Now is the time to buy!

30 year fixed mortgage

The rate on the 30 year fixed mortgage – the most common loan for homebuyers – increased to 3.69% last week from 3.55% the previous week. That’s the highest level since January 2020, according to Freddie Mac, and well above the average of 2.73% a year ago.

Surge in rates

The surge in rates followed an increase in 10 year Treasury yields. The 10 year Treasury rose above 2% for the first time since 2019 this week. Solid employment growth for January and a high inflation report are likely to accelerate the Federal Reserve’s plan to increase benchmark interest rates to combat inflation, which is running at a 40 year high. It’s a possibility that rates will increase three or four times this year.

We are used to historically low rates

Though recent rate increases have helped fuel homebuyer sentiment to plummet, the housing market has remained red hot. If you need a new house or have to relocate, you are going to buy a house.

The average sales price across the country for an existing single-family home rose 14.6% to $361,700 in the fourth quarter of 2021, according to the National Association of Realtors. As a result, entry-level homebuyers generally spent up to 25.6% of their household income on mortgage payment, further straining affordability for young buyers.

Rates are still historically low. By comparison, the average rate on the 30-year fixed mortgage reached an all-time high of over 18% in 1981, according to Freddie Mac.

Now is the time to refinance or invest

While rising mortgage rates will likely price out many young and moderate-income first time homebuyers, now could be a good time to lock in a rate if you want to refinance or are looking to rent.

Homeowners rushed to refinance their mortgages in January during a three-week break from rate increases that added more than a half-point to the 30-year fixed rate last month.

So now is the time to refinance. The same holds true for any real estate investors before rates climb to 4% in the second half of the year.

So you are going to be buying a little bit more expensive with a little more expensive money. It’s not going to get cheaper. If this is the market you want to get in, you need to get in now.

Contact me, Ben Keeney, 203-313-0013.