It’s no secret that the real estate market has shifted significantly since last year. It has, in fact, been a wild ride. Mortgage interest rates have been up, down, and then up again as investors try to guess the Federal Reserve’s next move. The Fed has been steadily hiking its own short-term rate to bring down inflation by cooling the economy. When the Fed raises its own rates, mortgage rates have often followed. Local mortgage industry expert, Orly Cohen with FirstTrust Home Loans, shares that “initial expectations were that rates would have already been a bit lower by mid-year but with the bank failures and debt ceiling debate, rates have stayed higher for longer than expected.”
Mortgage interest rates were above 7% earlier this month—much to the dismay of many cash-strapped buyers. Higher rates have made it more challenging for buyers to afford homes and incentivized many would-be sellers to stay put instead. As such, there’s less inventory and it’s expensive to buy what is available to buy.
The Fed meets again today and many are expecting rates to increase again. Local mortgage industry expert, Trevor Cobb with Highlands Residential Mortgage shares that “it is all but certain that the Fed will raise interest rates in the next meeting as they look to continue to battle inflation.”
The good news is that Real Estate experts don’t expect mortgage rates to remain this high forever. We may not see them ever go back down to below the 3% range but we do expect them to drop from the levels we’re seeing today. Trevor Cobb shares that “Mortgage rates should begin to move lower in the 4th quarter of 2023, but it could be 2024 before they move lower. People looking to purchase homes should take advantage of less competition to purchase in the market place, as interest rates are driving payments higher, and eliminating some buyers. There will be opportunity to refinance in the next 12-24 months.” Once the Fed wrangles inflation down to its target, it should stop raising rates. The Fed is walking a tightrope trying to cool the economy without causing additional bank failures or pushing the nation into a recession. If the economy slumps too much, the Fed will likely cut rates to stimulate it. That should bring mortgage rates down as well. In addition, Orly Cohen notes that “some global economies have shown some slow down recently, which is helpful for lowering rates.”
For those looking to buy right now, mortgage companies are offering some options and incentives. For example, Orly Cohen shares that she’s able to offer clients “a rate drop security program that gives borrowers $1,500 toward the bank refinance fees as long as the rate drops by 1% or more so that’s helpful to know some of the costs will be offset for a refinance.”
Trevor Cobb also shares that for those reluctant to sell and lose their low interest rate, he suggests they can “take out a HELOC, keep their current home, rent it out, and then use HELOC money for a down payment on a new house.” A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax deductible.
While the road ahead for interest rates may still have some ups and downs, The Jule Team is educated, experienced and ready to help you navigate the process with confidence! Have questions about the current market conditions and if it’s the right time to buy or sell? Please reach out! We would love the chance to assist you in your home buying and/or selling journey.