The last time inflation was this high, Olivia Newton John was topping the pop charts with “Physical,” ET the Extraterrestrial was going home, and the average price for a new house was $69,000.
For would-be home buyers, rising inflation has caused a lot of hand-wringing, and it’s easy to see why.
Escalating inflation and the cure for it - the Fed raising interest rates - is jacking up mortgage interest rates, putting home ownership out of reach for many.
For example, the average interest rate on the 30-year fixed mortgage is now nearly 6%, nearly double from the record low of 2.93% set in January 2021.
And mortgage rates are expect to edge even higher this year on the back of further Fed monetary tightening.
But there’s one potential positive consequence of higher mortgage rates you might consider:
Many aspiring buyers have given up the dream of home ownership, bailing out of the buyer pool. That’s significantly reduced competition in a market where housing inventories are super low and likely to stay so in the foreseeable future.
For now, the era of brutal bidding wars pushing up property prices into the stratosphere, leaving masses of discouraged “losers” in its wake, appears to be fading.
Instead, with the competition thinned out, those who stay the course may find winning a home easier, and at a sales price potentially more down to earth.
In addition, those who do buy and finance a home purchase in this market can lower their long-term mortgage costs by refinancing when interest rates settle back down. (I’m calling for 30-year mortgage rates to settle back down in 4.5% range by the end of 2023.)
In other words: Don’t marry the rate, marry the house!
If you have any questions about where mortgage rates are today, and what the cost of refinancing will look like later, give me a call and let’s chat!
SVP of Mortgage Lending
O: (973) 840-1972 - C: (201) 452-4825 - F: (773) 328-1535
4 Century Drive Suite 150, Parsippany, NJ 07054 NMLS ID: 1163201
Angelica Tanti, SVP, Mortgage Lending, Guaranteed Rate
Angelica has been instrumental in serving the local communities, bringing years of invaluable experience in the industry. Due to her vast knowledge, continual commitment to quality and having dedicated her career working to various purchase markets in New Jersey, Angelica has become a loyal and trusted resource among clients and associates. Prior to joining Guaranteed Rate, Angelica worked as a Mortgage Consultant and Guaranteed Rate and a Loan Officer at Homebridge Financial. She is a proud recipient of the All Star Award and has been recognized as the Top 1% of loan originators in the country.