March 29, 2022
The real estate market is now in the Spring season. When the housing market should be kicking into high gear, the latest news has everyone in shock. Mortgage interest rates are up. Interest rates rising fast is NOT good news.
Interest Rates Keep Rising
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%. Since the beginning of 2022, the rates have increased to about 4%. This last week, according to Wolfstreet.com, mortgage interest rates spiked to 4.98% and is expected to go above 5% very soon.
Looking at mortgage interest rates from January and on Monday, March 28, you can see the difference. Using data from Investopedia, you can note the drastic difference from just 2 months ago. 15 year fixed rates are up almost 50%.
Northern Virginia Sale Prices
The housing market in Northern Virginia is specific. According to VP of Mortgage Lending at Guaranteed Rate Affinity Ron Tinschert, “We all know rates have been rising. Unfortunately, faster than perhaps most of us hoped/expected. The national average for conforming loans (sale price under $647,200) is just about at the 5% level. Rates on loans over $647,200 have add-ons to these rates, taking them into the 5% range”. The average home sale price in Northern Virginia $666,457 so most home buyers are facing interest rates in the 5% range.
Forecast for Spring 2022
According to USNews, “It’s also entirely possible the market will see a combination of all three – a slower pace of sales, higher mortgage rates and a continued rise in prices.” It appears buyers don’t want to miss out on a lower mortgage rates before they go even higher and home sellers want to take advantage of higher home selling prices. The same article states, “Ironically, the rising prices and the higher borrowing costs could propel more buyers into the market this spring. Fear of missing out is a powerful driver of sales. At the same time, older sellers looking to move or downsize may see this as their best opportunity to get top dollar for their houses”.
As interest rates experience a drastic spike increase, it’s likely that, for now, buyers will want to lock in a relatively lower rate now rather than wait and see what happens in the summer. Home owners, wanting to take advantage of what could be the last of high buyer demand, may reconsider their timeline and put their homes up for sale. Still, with inventory so low, the number of home sales will remain low.
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Be sure to also check out my March 2021 Mortgage Update.
As always, please reach out with questions and concerns.