What was once a hot real estate market for sellers has officially cooled off due as monthly mortgage payments have risen dramatically over the summer. Many people who want to purchase a home feel priced out of this market while others wonder if now is the time to buy a home. The bad news is, the rise in borrowing cost shows no signs of letting up soon.
Economic uncertainty and the volatility of the financial markets are causing mortgage rates to rise. George Ratiu, Senior Economist and Manager of Economic Research at realtor.com, says this:
“While even two months ago rates above 7% may have seemed unthinkable, at the current pace, we can expect rates to surpass that level in the next three months.”
So, is now the right time to buy a home? Anyone thinking about buying a home today should ask themselves two questions:
1. Where Do I Think Home Prices Are Heading?
There are three places to turn to answer this question. The first place you should look is your local real estate expert. Much of the information you see in the media is national and most often negative in order to grab our attention. Locally, we have historically seen a much healthier market than nationally. For example, the graph below shows a 9.75% increase in home values in 2022 while locally we saw double this increase.
Second is the consensus of what national experts are projecting for home prices in 2023. While they are forecasting home price appreciation around 2%, we’ll likely see double that here locally. While it’s true some are calling for depreciation (and the media headlines), most are calling for appreciation in home values over the next year.
The third spot to turn to for information is the Home Price Expectation Survey from Pulsenomics. This is a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists. According to the latest release, the experts surveyed are also calling for home price appreciation for the next several years (see graph below):
2. Where Do I Think Interest Rates Are Heading?
Like mentioned above, Ratiu sees mortgage rates rising over the next several months. Another expert agrees. Mark Fleming, Chief Economist at First American, says:
“While mortgage rates are expected to continue to drift higher over the coming months, much of the rapid increase in rates is likely behind us.”
Both the instability in the world and higher inflation are driving this volatile market, resulting in higher mortgage interest rates for those looking to buy homes.
Bottom Line
If you’re thinking about buying a home, asking yourself about home prices and mortgage rates will help you make a powerful and confident decision. Also rely on your local real estate expert to guide you through the thinking process. As this blog points out, both prices and rates will likely rise in the future, but rates WILL fall again. The alternative is to rent, but rents are also increasing.
