Rates, prices, and the market future: Questions answered.

As the housing market evolves on a national level, it’s very tough to keep up and people are overwhelmed by the massive volume of news and the personal commentaries on what it all means. These days we feel that we are hearing non-stop from curious and confused buyers and sellers all the time, so we thought we’d share some commonly asked questions and the answers to them.

Q: Why are mortgage rates so much higher? A: Inflation.

Inflation is now running at a 40-year high. One of the two top jobs of the Federal Reserve is to control inflation, and currently, they are failing. As a result, the Fed has been hiking short-term interest rates at a pace we have not seen before and is warning consumers that more is to come until it is remedied. When the Fed lifts interest rates, it’s basically making money more expensive. This discourages people and businesses from borrowing money to buy things (aka houses), and in return slows the economy down.

Understand that the Fed doesn’t set mortgage rates. Other interest rates (bank account deposit rates, CDs, bonds, etc.) “build” off the Fed Funds Rate. Mortgage rates and the Fed Funds Rate can move in different directions in the short-term (days/weeks), but in the medium and long-term (months/years), they move in sync.

Q: Is it a bad time to sell? A: Absolutely NOT. It’s still a fantastic time to sell.

Home prices may be below their June 2022 top, but they are still up by roughly 15% in the last 12 months and up by at least 30% since the onset of the pandemic. If you’ve owned your home for more than a few years, you are sitting on large gains. Don’t stress about “missing the top.” Keep in mind, the profits are only real when you sell the property and the cash is in your bank account. You just need to be realistic with your list price like always which we can help you with. In some markets, sellers are continuing to receive multiple offers. This is neighborhood specific.

Q: Is it a bad time to buy? A: Well yes, but things are getting better.

It can’t be both a great time to sell and an awesome time to buy at the same time in any market or rate adjustment. Mortgage rates have jumped considerably in the last year and home prices are still up. In combination, this means that the average homebuyer’s monthly mortgage bill is up compared to a few years ago. So of course, many buyers are kicking themselves for not acting sooner. With this being said buyers are starting to regain some bargaining power. The market is starting to see price corrections turning into a more “normal” market. Again this is neighborhood specific. 

Keep in mind that time is always your investment friend. If you buy property now, you can be quite confident that in 10 years’ time the value will be significantly higher, even if the price goes down in the short term. Moral of the story: “The best time to buy a home is always 5 years ago.” (and I am sure most of you realize hindsight can be horrible!)

Q: Should I just continue renting until home prices and interest rates come down?

A: That’s an understandable argument, BUT…

…demand still exceeds supply in most markets. That suggests that prices aren’t likely to have a huge drop by any means. And while most forecasters do expect that mortgage rates will start to go down in 2023, it’s unlikely that they will ever get back below 4%. And, of course, rental rates are currently rising at a faster rate than home prices.

In the long term, it’s almost always a better financial decision to buy versus rent. However personal circumstances play a huge role in the buy vs. rent decision. Keep in mind that many buyers still think that you need to have perfect credit and a large down payment which is simply not true. We have lenders that can help you with this. For the stats of your specific location on a weekly basis please contact us so we can get this to you.