The average 30 year mortgage rates hit an all-time-low in 2021 with many people locking in rates below 3.0%. Experts predicted that rates would climb in 2022 to the high 3% or low 4% range. In early April rates have already reached 5.5%. This will have a real impact on monthly mortgage payments and what buyers will be able to afford. Believe it or not, rising interest rates are good news for home buyers. Read on to learn why buyers will benefit from rising mortgage interest rates.
Why Rising Interest Rates Benefits Buyers
I know this sounds crazy but hear me out.
Home buyers have been getting beat up for almost two years from the extremely hot sellers real estate market. We’ve heard the stories of home going 20% above asking, 20+ offers on all listings and full cash offers with no inspections. We all asked when the tables may turn back in favor of buyers but truthfully, with supply and demand where it is, the economics of this market won’t change unless we can slow demand.
That’s where interest rates come into the picture. Rates rising over 2% in a few months has a real effect on average mortgage loan payments and ultimately how much people can afford. This is scary to those who are already struggling to afford current prices in Northern Colorado. However, this is going to drive some people out of affordability.
I’ve already talked to people who can no longer afford to buy homes in the price range they were looking or they will need to move from a Conventional loan to a FHA loan. This will drive people out of the market and will slow down demand.
What Does This Mean For Qualified Home Buyers?
Rising interest rates will benefit highly qualified buyers because it is going to take some of the lesser qualified buyers out of the market. This means your odds of getting a home will increase. You may not have to offer so far above the asking price and you might be able to ask for some inspection items.
Remember, even at 5% interest rates, a 30 year mortgage rate is far cheaper than rates we’ve seen in the last 40 years. It’s still very low compared to average historical rates.
Should You Wait to Buy A Home When Rate Drop Back Down?
Simply put, we don’t know what will happen with interest rates. Inflation is very high so rates may continue to rise. You a better off to get into the market at whatever rate you can get at this time because they may rise much higher. You can always refinance in the future if rates do come down.
All of this said, now is a great time to buy real estate. Home prices are still expected in increase. A slight slowdown in demand will work in buyers favor but won’t be significant enough to keep prices from going up as there is still a major deficiet in supply and demand.
Reach out to me with your specific questions about buying or selling real estate.
Is Now a Good Time to Buy a Home?
The answer really depends on what your intention is for that home. The current real estate market in May of 2022 probably isn’t the best time to buy a home for a quick flip. But, if you are buying a home for your primary residence this is still a great time.
If you plan to live in this house for at least a few years, the expectation is still that the prices of homes will increase. The supply and demand is going to be a problem for a long time so prices will stay strong or continue to rise but at a slower pace than in 2021.
If you are buying a house for a rental, now is still a great time. Monthly rent amounts will continue to go up with inflation and supply and demand for homes to live in. It is still a good time to buy a rental if you can get the numbers to work for you.
If you have more questions about buying or selling real estate in Northern Colorado, reach out to me.