NASHVILLE, Tenn. (WKRN) — Hopeful homebuyers are holding their breath, preparing for the Federal Reserve to raise interest rates in an effort to tame inflation.
Following the trend, mortgage rates are at their highest levels since March 2020, and even though the rate increase makes buying a home less affordable, it’s lighting a fire under some buyers.
A new Redfin survey shows nearly half of house hunters would feel more urgency if mortgage rates hit 3.5%, which they did as of last week.
Robbie Drimmer, a realtor with the Drimmer Group of Compass Real Estate says it’s making for a competitive January, something realtors aren’t always used to seeing.
“There are more buyers out there than I’ve ever seen looking at properties — probably 100 buyers for every listing out there and low inventory, so it’s been an interesting first quarter that’s for sure,” Drimmer said.
Though, there is somewhat of a silver lining; experts hope the raising of mortgage rates will pump the breaks on housing demand over time, putting an end to double-digit annual price growth.
Freddie Mac’s Quarterly Forecast predicts the housing market will remain stable, despite the hike in mortgage rates and cooling price growth.
They are forecasting mortgage rates to average 3.6% in 2022 and reach 3.9% in 2023.
As of Monday, the average for a 30-year loan sits at 3.56% — up from 3.45% the week prior.
It sounds small, but the increase is significant, especially if you’re a cash-strapped first-time buyer.
Drimmer was kind enough to do the math for us.
“If you’re looking at a $500,000 house in Nashville right now at 3.4% with 20% down, you’re looking at roughly $2,300 dollars a month. If that interest rate goes up to 4%, which all indications point to it reaching 4% by the end of 2022, plus home values going up 7% – 10%, you’re looking at a $550,000 house at 4% with 20% down, that’s $2669 a month,” Drimmer said.
That’s a difference of almost $400 a month, or $130,000 more over the life of a 30-year loan.
Some fear the continued increase will put the American Dream of owning a home further out of reach.
“I think that if you have the intentions of buying, strike while the irons hot before rates continue to go up,” Drimmer said.
The Federal Reserve’s first meeting of 2022 is set to start Tuesday, with some experts predicting it will set the groundwork for an interest rate hike in March — the first of many.