Hoping to buy a home? A real estate sign saying "bummer, pending" pretty much sums up the housing market in 2022.
Homebuyer Nicole Bouchard has spent 4 months looking and losing house after house to other couples.
"It felt really hopeless because houses were going before we could even see them," she said.
But now, she and other buyers have a bigger problem: Mortgage rates that have soared from 3.5% to over 5% since last year, and are predicted to rise even further after the Fed's second rate hike of the year on May 4th.
"We were worried about the rates going higher," she said, "obviously because you can't afford as much house, and if the cost of the house is still inflated, and rising interest rates, what would we be able to afford."
Third punch to home buyers
It's so frustrating for buyers, who have been coping with bidding wars and so few homes for sale. Now they have to deal with a third gut punch: Rising mortgage rates. It's putting even more homes out of reach.
Realtor Michelle Sloan worries about some of her buyers giving up, unable to afford a 3-bedroom middle-class home in a decent neighborhood.
"The rise in mortgage rates will force a lot of buyers out of the market," Sloan said. "Because they won't be able to afford what they thought. So if they thought they could afford a $300,000 loan, maybe now they can only afford a $250,000 loan."
She says homebuyers should:
- Lock in the lowest 30-year rate you can find.
- Consider a 3 or 5-year adjustable mortgage, or ARM, with lower rates, but realize the rate could jump sharply after that.
- Save up as much cash as you can for a down payment, because cash talks in this highly competitive market.
- Make an offer immediately if you like the home, as 10 other people may make an offer by the end of the day.
One bright side of rising rates: Sloan says higher rates should eventually give buyers more homes to choose from later this year, as the market cools.
But, as for right now, she says, "I didn't think inventory could get any lower, but it has."
In the meantime, realtors like Steve and Denise Taylor say it is essential right now to have a good agent, who can spot homes the moment they are listed, and take you through it online if you can't go see it immediately.
"Homes that come on the market today are gone tomorrow," Denise Taylor said. "So we have some clients where if they can't come in person we will do a virtual tour with them, so they can have an opportunity to purchase the home."
So while the home market is showing signs of slowing down, at the moment it remains as competitive as ever.
That way you don't waste your money.
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