COLUMBIA, S.C. — This week the Federal Reserve increased the federal interest rate by .75%, increasing the cost of everything from credit cards and auto loans. This impact includes the housing market, which has been rocky for the past couple of years as a result of the pandemic.
Sandra Sturkie is a real estate agent for McDaniel and McDaniel. She says last few months she’s seen some of her clients priced out of buying homes because the interest rates are increasing.
“As the interest rate increases, their purchasing power decreased. So, one of them started with a budget of $200,000 and it went down to $165,000 because of the interest rates.
Kate Stokes works as a loan officer for Guild Mortgage, she says her clients’ interest rates increase homeowners monthly by hundreds of dollars in a matter of months. Even as the market in South Carolina starts to shift back to normal inventory, families aren’t able to jump in because of this interest rate hurdle.
“Take a $200,000 loan, in January, maybe they got a 3.5 rate. That's roughly a $900 mortgage payment, principal and interest. When you fast forward to September 2022, that same $200,000 loan amount is now over $1250, so that's an increase over $300…We’re starting to see inventory increase but because those interest rates are higher, it’s taking them longer to find a home that still meets their requirements."
Sturkie and Stokes are both optimistic that with the value of homes steadily increasing, it’s still a good time to make the purchase, especially with the cost of rent being similar to a mortgage payment. Sturkie explains that if you’re struggling to find something within your budget right now, try these steps.
- Look in a different location – if you’re far from a city your cost of living will likely be lower despite a longer commute.
- Try alternative financing – government backed loans such as FHA loans allow you to put less money as a down payment
- Seek assistance – she says mortgage companies might offer down payment assistance, or point you to a program that can help.