If you’re thinking about buying a home, you’ve probably heard mortgage rates are rising and have wondered what that means for you. Since mortgage rates have increased over two percentage points this year, it’s natural to think about how this will impact your homeownership plans.

Today, buyers are reacting in one of two ways: they’re either making the decision to buy now before rates climb higher or they’re waiting it out in hopes rates will fall. Let’s look at some context that can help you understand why so many buyers are jumping off the fence and into action rather than waiting to buy.

A Look Back: How the Current Mortgage Rate Compares to Historical Data

One factor that could help you make your decision to buy now is how today’s mortgage rates compare to historical data. While higher than the average 30-year fixed rate in recent years, the latest rates are still comparatively low when you look at the bigger picture of where rates have been since 1971 (see graph below):

Mark Fleming, Chief Economist at First American, explains it like this:

“. . . historical context is important. An average 30-year, fixed mortgage rate of 5.5 percent is still well below the historical average of nearly 8 percent.”

If you’re deciding whether to buy now or wait, this is important context to have. Today’s mortgage rate still gives you a window of opportunity to lock in a rate that’s comparatively lower than decades past.

A Look Ahead: What Happens if Rates Climb Further

The buyers who are springing into action now are also motivated to make their move because they know rates have risen steadily this year, and they’re eager to get ahead of any further increases.

Why? When mortgage rates climb, they impact the monthly mortgage payment you’ll have on the home you’re buying. Basically, it’ll likely cost you more to buy a home if you wait. Experts say mortgage rates will rise (although more moderately) in the months ahead. Odeta Kushi, Deputy Chief Economist at First American, explains:

“. . . ongoing inflationary pressure remains likely to push mortgage rates even higher in the months to come.”

So, if you’re ready and financially able to buy now, it may make more sense to get off the fence and make your purchase sooner rather than later. As Nadia Evangelou, Senior Economist at the National Association of Realtors (NAR), says:

“With even higher interest rates on the horizon, I don’t see any reason to hold off from purchasing a home right now. If you feel financially secure, you should start looking for a home.”

At the end of the day, there is no perfect advice on when to buy a home. What you should do depends on your goals, your finances, and your personal situation. Use this information with the help of local real estate professionals to make an informed decision on what’s best for you. The Mortgage Reports sums it up best:

“. . . if you’re on the fence about whether to buy now or wait for a better deal, buying sooner rather than later might be wise. That said, home buying is always a personal decision. Whether you should buy in 2022 depends on your financial situation and the local housing market where you live.”

Bottom Line

For many buyers, rising mortgage rates are motivating them to act now and make a purchase before rates rise higher. To decide what move is best for you, let’s connect so you have expert advice on your side.

Being intentional and competitive are musts when buying a home this season. That’s why pre-approval is so important today. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Peter Warden, Editor of The Mortgage Reports, explains:

“The lender will check out your personal finances and issue you a letter confirming the amount you’re eligible to borrow. This not only gives you a firm budget for house hunting, but also lets sellers know you’re qualified to make an offer.”

Why does that matter so much today? There are many more buyers looking for homes today than there are homes available for sale, and that’s creating some serious competition. According to the National Association of Realtors (NAR), the average home is getting 4.8 offers per sale. As a result, bidding wars are still common.

Your pre-approval gives you a leg up in these situations. That’s because you know exactly what you’re approved to borrow before you write your offer, and it lets the seller know you’re qualified to buy their home. This helps both you and the seller feel confident in what you’re bringing to the table. And that puts you in a better position to potentially win a bidding war.

As Warden puts it:

“There’s another important reason to get preapproved, too. And that’s because there are way more buyers than homes in today’s market — which means you need to be ultra-prepared if you want to win a bidding war. Most sellers are getting multiple offers right now. And most won’t even entertain an offer without a preapproval letter included.”

Every advantage you can gain as a buyer is crucial in a market that’s constantly changing. Mortgage rates are rising, home prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals, such as a loan officer and a trusted real estate advisor, on your side. They’ll help make sure you’re ready to put your best foot forward.

Bottom Line

Getting pre-approved for a mortgage helps you better understand what you can afford and signals to sellers you’re serious about purchasing their home. Let’s connect so you have the tools you need to succeed as a homebuyer in today’s market.

If you’re planning to buy a home this season, you’re probably thinking about what you’ll need to do to get your offer accepted. In previous years, it was common for buyers to try and determine how much less than the asking price they could offer to still get the home. The buyer and seller would then negotiate and typically agree on a revised price that was somewhere between the buyer’s bid and the home’s initial asking price.

In today’s real estate market, buyers shouldn’t shop for a home with the same expectations.

Things Are Different Today

Today’s housing market is anything but normal. According to the National Association of Realtors (NAR), the average home that’s sold today:

• Receives 4.8 offers
• Sells in just 17 days

Homes selling quickly and receiving multiple offers shows how competitive the housing market is for buyers right now. This is because there are more buyers on the market than homes for sale. When the number of homes available can’t keep up with demand, homes often sell for more than the asking price.

How Does This Impact You When It’s Time To Submit an Offer?

Market conditions should help guide your decisions throughout the process. Today, the asking price of a home is often the floor of the negotiation rather than the ceiling. Knowing this is important when it’s time to submit an offer, but you should also use that information as you’re searching for homes too. After all, you don’t want to fall in love with a home that ultimately sells for a price higher than what you’ve budgeted for.

The Mortgage Reports has advice if you’re looking to purchase a home in a competitive market. The article encourages you to be realistic with your housing search, saying:

“The best thing to do is set your budget and expectations ahead of time so you know how much you can afford to offer — and when to walk away. This will make negotiations a lot easier.”

Of course, when you’ve found your dream home, you’ll want to do everything you can to submit your best offer up front and win a potential bidding war. Knowing the current market is key to crafting a winning offer. That’s where working with an expert real estate advisor becomes critical.

A real estate professional will draw from their experience and expert-level knowledge of today’s housing market throughout the process. They’ll also balance conditions in your area to make sure your offer stands out above the rest.

Bottom Line

Understanding how to approach the asking price of a home and what’s happening in today’s real estate market are critical for buyers. Let’s connect so we can work together to create a winning plan for you.

If you’re following along with the news today, you’ve likely heard about rising inflation. You’re also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.

If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.

Homeownership Offers Stability and Security

Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.

Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:

“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.” 

So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.

Use Home Price Appreciation to Your Benefit

While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in at today’s rates and prices before both climb higher.

In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):

So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows your investment is a strong one.

Bottom Line

If you’re ready to buy a home, it may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let’s connect.