Are Higher Interest Rates Here To Stay?
Good Monday Morning!
Are higher interest rates here to stay? To some extent, I believe they are. We may never see mortgage interest rates at 2.5% again. That's not all bad, though. Low mortgage interest rates to that extent have long-term issues. What we may see is rates decline from the 7% range and hopefully settle in at around 5.5% or maybe slightly lower. But for now, buyers seem to be settling in on the rates in the high 6% to 7% range. The national housing market seems to be breathing some life again, despite rates. The following is an article that talks about recent consumer trends with the mortgage interest rates.
Mortgage shoppers and hopeful homebuyers are getting no relief on borrowing costs at the beginning of the year, with mortgage rates shooting past the 7% mark and hitting their highest point since May.
But with the pandemic-era days of rock-bottom interest rates fading into distant memory, consumers may no longer be as easily deterred by climbing mortgage rates as they were in 2022, according to a brokerage CEO who says current costs are nothing new for many buyers.
Darren Copeland (pictured top), founder of Summit Lending, told Mortgage Professional America the mortgage industry had been battling that rate problem for two years – and many prospective homebuyers aren’t viewing rate spikes with the same dismay as before.
What’s more, many are moving ahead with their purchase if they’re able to, in the expectation of a potential refinance down the line when rates finally tick lower.
“I think people are getting used to it,” he said. “One of the things that we’re doing is having that discussion with them to make sure that they’re in the right spot and that they get a really good deal. But then we’re also moving forward what we’re already coaching them on, the future refi – so that when the rates do go down, eventually, whatever that timeline is, we’ll come back in.
“We’ll… tell people ‘Hey, we’ll watch the market for you. And we’ll hook you up on the refi,’ just to continue the good vibe to make sure you’re taking care of your database.”
Is housing set to turn the corner on the supply front?
Existing-home sales slid to their lowest level since August 2010 last month, hitting a seasonally adjusted annual pace of 3.78 million units, but the National Association of Realtors (NAR) – which released the data – indicated a turning point for the market could be imminent.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” Lawrence Yun, chief economist at the NAR, said, with a burst of supply hitting the market likely to spur growth in the months ahead. Buyers are increasingly conscious of the potential for a market uptick down the line, according to Copeland. “The challenge is if people sit around and they’re playing the rate game and waiting for rates to fall. Let’s say rates fall into the fives,” he said. “Now you’re going to have everyone coming out of the woodwork that wants to buy houses.
“So you’re overbidding $40,000, $50,000, $60,000 on a house. Whereas if you just bought the house now at 7% and in six months, let’s say the rates go down – instead of you overpaying for that house, now what you’re doing is a simple refi. Now you’re just saving money and everyone out there is fighting for the inventory.”
New buyers stay optimistic despite rates spiraling upwards
First-time buyers are facing especially steep challenges because of those affordability hurdles – but Copeland pointed to a relatively promising outlook for that buyer cohort in his market around the Kansas/Missouri border, even though those that can afford a property may not be able to get all the house they want for what they’re able to pay.
That’s still often preferable to renting. “With the way the rents have increased over the past few years, a first-time homebuyer payment versus rent is going to be very similar,” Copeland pointed out.
“One of the challenges is they forget that their parents had the starter home – the first step-up home. So these kids want to go straight to the type of house their parents have right now. They don’t want to take a step back and buy a first-time homebuyer house which is probably not as nice as what they grew up in.” Unsurprisingly, with prospects better for new buyers in that region than pricier parts of the country, plenty of first-time entrants to the market are turning their attention to a purchase in Kansas or Missouri. “Let’s say the rate is 7% or whatever it is,” Copeland said. “The payment on that compared to a house that they would get in New Jersey or California – it’s just crazy. It’s a whole different realm.”
Have An Awesome Week!
Stay Healthy! Stay Safe! Remain Positive! Trust in God!
THIS WEEKS HOT HOME LISTING!
32568 Deberry Rd, Creswell, OR
Price: $2,770,000 Beds: 4 Baths: 3.0 Sq Ft: 5433
Welcome to one of Lane County's finest estate homes! Every detail of this exquisite residence has been thoughtfully crafted to create an unparalleled living experience. Bathed in natural light, this unique home boasts soaring ceilings and premium ma... View this property >>
