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How Smart Buyers Are Approaching Rising Mortgage Rates
Last week, the average 30-year fixed mortgage rate from Freddie Mac inched up to 3.1%, and experts project rates will continue rising through 2022:“The 30-year fixed-rate mortgage was 2.9% in the third quarter of 2021. We forecast mortgage rates to increase slightly through the remainder of the year and reach 3.0%, rising to 3.5% for full year 2022.”If you’re thinking of buying a home, here are a few things to keep in mind so you can succeed even as mortgage rates rise. Taking Time Off Can Be CostlyMortgage rates play a significant role in your home search. As rates go up, your monthly mortgage payment increases if you’re buying a home, directly affecting how much you can afford. And even the smallest increase can have a large impact on your monthly payment (see chart below):With mortgage rates on the rise, you’ve likely seen your purchasing power impacted already. Instead of waiting and hoping rates will fall, today’s rates should motivate you to purchase now before rates increase more.Smart Buyers Can Succeed by Planning AheadYou can use your newfound motivation to energize your search and plan your next steps accordingly so you’re prepared to act no matter what happens with mortgage rates. One way to do that: take rising rates into consideration as part of your budget. Danielle Hale, Chief Economist at realtor.com, puts it best, saying:“Smart buyers should consider calculating a monthly payment not only at today’s rates, but also at rates that are a bit higher so that they won’t be derailed by a sudden upward move. . . .”You should also be ready to act when you find the home that meets your needs. That means getting pre-approved with a lender so there won’t be any delays when the time arrives.The best way to prepare is to work with a trusted real estate advisor now. An agent can connect you with a lender, help you adjust your search based on your budget, and be ready to act quickly when it’s time to make an offer.Bottom LineSerious buyers should approach rising rates as a motivating factor to buy sooner, not a reason to wait. Waiting will cost you more in the long run. Let’s connect today so you can better understand your budget and be prepared to buy your home even before rates climb higher.Content previously posted on Keeping Current Matters
Don’t Believe Everything You Read: The Truth Many Headlines Overlook
There are a lot of questions right now regarding the real estate market as we head into 2022. The forbearance program is coming to an end and mortgage rates are beginning to rise.With all of this uncertainty, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news sells. Unfortunately, we’ll continue to see a rash of troublesome headlines over the next few months. To make sure you aren’t paralyzed by a headline, turn to reliable resources for a look at what to expect from the housing market next year.There are already alarmist headlines starting to appear. Here are two recent topics you may have seen in the news.1. Foreclosures Are Spiking TodayThere are a number of headlines circulating that call out the rising foreclosures in today’s real estate market. Those stories focus on an overly narrow view on that topic: the current volume of foreclosures compared to 2020. They emphasize that we’re seeing far more foreclosures this year compared to last.That seems rather daunting. However, though it’s true foreclosures have been up over the 2020 numbers, it’s important to realize that there were virtually no foreclosures last year because of the forbearance plan. If we compare this September to September of 2019 (the last normal year), foreclosures were down 70% according to ATTOM.Even Rick Sharga, an Executive Vice President of the firm that issued the report referenced in the above article, says:“As expected, now that the moratorium has been over for three months, foreclosure activity continues to increase. But it’s increasing at a slower rate, and it appears that most of the activity is primarily on vacant and abandoned properties, or loans in foreclosure prior to the pandemic.”Homeowners who have been impacted by the pandemic are not generally the ones being burdened right now. That’s because the forbearance program has worked. Ali Haralson, President of Auction.com, explains that the program has done a remarkable job:“The tsunami of foreclosures many feared in the early days of the pandemic has not materialized thanks in large part to the swift and decisive foreclosure protections put in place by government policymakers and the mortgage servicing industry.”And the government is still making sure homeowners have every opportunity to stay in their homes. Rohit Chopra, the Director of the Consumer Financial Protection Bureau (CFPB), issued this statement just last week:“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago. Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law.”2. Rising Mortgage Rates Will Slow the Housing MarketAnother topic that’s generating frequent headlines is the rise in mortgage rates. Some people are expressing concern that rising rates will negatively impact the housing market by causing home sales to dramatically decline. The resulting headlines are raising unneeded alarm bells. To counteract those headlines, we need to take a look at what history tells us. Looking at data over the last 20 years, there’s no evidence that an increase in rates dramatically forces sales to come to a halt. Nor does home price appreciation come to a screeching stop. Let’s look at home sales first:The last three times rates increased (shown in the graph above in red), sales (depicted in blue in the graph) remained rather consistent. It’s true that sales fell rather dramatically from 2007 through 2010, but mortgage rates were also falling at the time. The next two instances showed no meaningful drop in sales.Now, let’s take a look at home price appreciation (see graph below):Again, we see that a rise in rates didn’t cause prices to depreciate. Outside of the years following the crash, prices continued to appreciate, just at a slower rate.Bottom LineThere’s a lot of misinformation out there. If you want the best advice on what’s happening in the current housing market, let’s connect.Content previously posted on Keeping Current Matters
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