What Mortgage-Rate Flux Means for House Hunters Now
Though average mortgage interest rates fell ever so slightly last week, according to the Primary Mortgage Market Survey from Freddie Mac, many real estate experts see this as more of a stabilization after a sudden spike, than an indicator of future trends. Last week's rates for a 30-year fixed rate mortgage averaged at around 4.37 percent, over half a point higher than their lowest this year, 3.35 percent in early May.
This year also began with rates at 3.34 percent for a 30-year fixed rate mortgage, but professionals across the board are saying rates won't be that low again.
Dr. Joseph R. Mason, professor at Louisiana State University, says that we might see normal fluctuations, but rates are still desirable now. "While there could be some temporary blips to slightly lower than today," he commented, "there is not much room for downside." This is consistent with what real estate professionals are seeing on the ground in various markets, as well.
Cindy Marlowe, a RE/MAX Realtor in the Denver-metro area, says of the upswing in mortgage rates: "The downside to the buyer is that their money doesn't quite go as far, so they will purchase slightly less house than a few months ago. However, I haven't seen any evidence of this increase keeping buyers away from the market that are looking to buy." But Anthony Kamouzis, owner of Prudential One Realty in Phoenix, Arizona, says he has seen some tightening of the purse strings in his market.
He offered an example: "In my area, the blue-collar worker is down at around 110,000 on the affordability index, which has become the bottom of the market. Remember that prices have gone up 35 percent in some areas of the country. Couple that with a 1 percent interest rate increase, and now the person who barely qualified for their first home is out." He did say that demand is still high compared to inventory, but increases in interest rates will price out buyers and eventually decrease demand.
Mason gave a different reason for shifts in homebuying trends. "Rates are not dictating buying activity right now so much as inventory," he said. "There is a lot of shadow inventory that is pressing down demand. In many markets, speculation for rentals is also skewing home buying decisions."
Should Buyers Jump In ... Or Wait?: Erica Ramus, broker and owner of RAMUS Realty Group in Pottsville, Pa., says that she's advising buyers to buy sooner rather than later, but onlyif they're truly ready. "Don't buy a house simply because you are afraid rates will go higher," she offers. "Buy a house because you have a need, a desire, and can afford it. But don't be scared into buying something you're not ready for, or don't truly love, because the media is screaming that you have to buy now or you'll miss out on these low rates."
She also echoed many other real estate professionals in saying, "People need to remember that these are historical low rates we've had the past few years. They couldn't last forever and will go up."
Rates are difficult to predict, and estimations on future trends are highly speculative. Most experts are in agreement that rates will increase toward the end of the year, and to deal with this, Ramus shared some advice: "You simply adjust your expectations and how much house you buy based on what you can afford, factoring in the interest rate."
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