The real estate market of 2021 was aggressive and competitive. It made a lot of buyers exhausted, frustrated and some have even made the decision to “hold-off until the market changes.” The low inventory and extremely low interest rates drove a lot of buyers into the market to begin with. These lowered interest rates increased purchasing power. Near the end of 2021, however, rates slowly started to increase and are expected to continue to rise in 2022.
I spoke with Brian Gagnon of Northstar Mortgage to get his thoughts on mortgage interest rate trends: “With inflation showing signs of being more permanent than transitory and with the Federal Reserve promising to taper its bond purchases, I expect mortgage rates to modestly increase now and to increase into 2022. Mortgage rates tend to follow the U.S. 10-Year Treasury Bond yield, and I expect this figure to increase as our economy continues its recovery and if inflation remains elevated. While this may seem like bad news for those looking to invest in real estate right now or for any homeowners who are looking to refinance their existing mortgages, do not be discouraged. If the expected 2022 average rate, for a 30-year mortgage, increases to 3.5 percent, we must remember how historically low this is. Just three years ago, the average rate for a 30-year mortgage was almost 5 percent, so there remains a lot of buying power for individuals and for families. Also, with rising equities in people’s existing homes, cash-out refinances will remain a great option for many homeowners.”
Moreover, waiting for the market to change could play a significant role in how much your mortgage payment will be and/or how much house you will, effectively be able to purchase. For example, when interest rates were 2.75 percent, the mortgage payment on a $400,000 home would be approximately $1,633 (principal and interest) per month. As rates increase, that same home, at an interest rate of 3.75 percent, would be approximately $1,852 (principal and interest) per month. Consequently, if you were previously approved for a $400,000 home, or looking to keep a certain monthly mortgage payment, your buying power could be lessened to $360,000 or less as rates increase.
Overall, rates will still seem low compared to year’s past, but could be detrimental, nonetheless, to some. Serious and savvy buyers will be ready and aware of the impact that any potential increase in interest rates will do to their purchasing power. To be prepared, I would suggest working with a local, knowledgeable and trusted mortgage lender who will have a heads up of your financial standpoint and purchasing goals. With this knowledge, the lender is able to keep an eye on market trends specific to your financial scenario and has the ability to advise or suggest actions based on trend performance, for example, rate lock. On the flip side, I highly suggest working with a local, knowledgeable, and trusted real estate professional (Me!) who is able to act quickly when a home that meets your needs hits the market. A pre-approval letter from the aforementioned lender, and getting into your prospective home in a timely manner, ensures that there will not be any delays when it’s time to make an offer. <
All in all, I would suggest that this is not necessarily the time to “wait and buy” OR “wait and see what the market does.” I do not have a crystal ball, but we can see that rates are increasing; I know what I have been up to in real estate, and I am still experiencing multiple offer situations! For this time of year, this tells me that the market is still going strong. The bottom line is that any serious buyer should take the rising interest rates as motivation to buy sooner rather than later. In the long run, waiting could actually cost you more money ~ yikes!
As always, I am happy to chat with you personally about your real estate goals. Consider me as your local, knowledgeable, and trusted resource for ALL of your real estate needs. There is never any obligation and I always keep your information confidential. I value my work ethic and the service that I am able to provide to my clients. Additionally, I align myself with like-minded industry professionals who are also ready to assist you; teamwork!
Happy New Year and wishing you much success in 2022!
Kristin Piccone is a REALTOR for Landing Real Estate in Windham. Reach her at 207-951-1393 or by email at firstname.lastname@example.org