The real estate market is now in the Fall season, a time when there is a boom of activity, especially in October. Still, it appears the housing market continues to cool. Most experts are pointing to higher mortgage interest rates which has made homeownership unappealing for some and out of reach for others. Some buyers are considering renting until rates go down. But is this the best course of action? Many are wondering, will mortgage rates keep going higher?
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Last week, the Federal Reserve Chair Jerome Powell said of the housing market, “There was a big imbalance … housing prices were going up at an unsustainably fast level. For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again. We probably in the housing market have to go through a correction to get back to that place.”
And the plan seems to be working so far. Buyers are backing off and Sellers are responding. According to Bright MLS data, more than 50% of homes for sale have had a price adjustment or drop. Buyers were first in shock at the new rates and now seem to be waiting for things to settle down.
WHERE MORTGAGE RATES ARE NOW
Rates have been consistently rising from the beginning of the year. In 2021, the average mortgage interest rate on a 30-year conventional loan was under 3%. Rates as of September 29 and now at the 7% mark and this is for buyers looking for a home with a 80% loan to value ratio and have FICO credit scores between 700-760.
MORTGAGE INTEREST RATES HISTORICALLY
As this graphic from MBH Highway shows how in the 1980’s interest rates were as high as 18%. Another recession not 1990’s had are rates at 11%. Subsequent recessions have not seen rates that high since.
WILL RATES CONTINUE TO RISE?
Most experts expect another hike from the Federal Reserve before the end of the year. And there is much speculation including by Fannie Mae, about a recession being announced early next year. There has even been talk of a global recession.
BOTTOM LINE
So the bottom line is that mortgage interest rates will likely continue to rise well into next year. So it appears that buyers (who can afford it or need to move) may want to consider locking in a lower rate now before they go even higher. Home sellers may consider patience during this time.
SEE RELATED VIDEO
Be sure to also check out my September 2022 Market Update
As always, please reach out with questions and concerns.
