Watch the original video: April 2022 Mortgage Monthly Update
Happy Spring. Here is your Monthly Mortgage Market Update for April 2022. In this month’s video I talk about the factors that are affecting rates right now, if it still is a good time to buy and what we can expect moving forward. Watch the video above to learn more.
📈 Rates Are On the Rise
As many of you are aware, mortgage rates are on the rise. This comes as a shock to a lot of those who are in the market to buy. So if we look ahead to the summer, traditionally some of the busiest months of the year in the housing market, a lot of people are concerned about what the future holds. Today, I’d like to take some time and explain a few factors that may help you make a more informed decision.
🤔 Why are Interest Rates Increasing?
The Federal Reserve raised the fed rate in March for the first time since 2018. In addition, they essentially stopped some of their stimulus programs, commonly referred to as quantitative easing. This is where they were purchasing assets to artificially keep rates low. They also started selling some of their assets back into the market, which has come as a shock to the financial markets, and is why we’ve seen so much volatility in mortgage rates over the last few months.
💰 How Does Increased Rates Affect Affordability?
However, for most people in Shasta County and Northern California, it’s about a $100 difference monthly when it comes to a 30 year fixed mortgage. So, in most cases buyers will be able to afford payments where rates are at today.
⁉️ Where are Rates Headed?
There are some experts that are predicting rates could reach the 6’s, 7’s or 8’s by the end of the year. The reason for this is that the Federal Reserve and our current administration is concerned that they have created a bad situation in terms of inflation. We have all seen inflation affect our gas prices, groceries and energy bills, but for many this is already at a detrimental point for their families. What they want to do is act quickly to try and get inflation under control, which could create some temporary pain when it comes to mortgage rates.
👍🏼 Here’s the Good News.
Right now when someone is looking to purchase a house and they compare it to renting a similar home, they will still be paying less to buy vs. renting over the course of a few years. Rent prices are rising quickly and most rental homes in Shasta County will raise their rent 5% every year for the next several years as a result of rent control. So for most, it still makes sense to buy vs. renting.
🙌🏼 Rates Could Drop Again.
If you look back at the last 30-40 years any time we see rates rise, this is usually followed by a time where rates drop again. So when you are getting pre-qualified or looking to buy, you may be locking into a rate that you wish were lower and your mortgage professional may suggest paying points or even looking at an adjustable rate mortgage. Those could be good options, however, most experts are predicting we will see low rates again. Possibly even in the next 1 to 3 years, due to a possible recessionary event. There are cycles over the last few years where rates will go up and down, so we are advising our clients not to pay points and just lock into a rate and look forward to the opportunity to possibly refinance at a later time.
🏡 Home Values Are at an ALL TIME HIGH
The BIG question on everyones mind over the last year has been, “Is the Housing Market Going to Crash.?” Home values are at an all time high, but no one really knows if a crash is in our future, but the odds are very unlikely that we will see home prices crash. We may not even see home prices decrease that much at all because of the demand and lack of supply.
📉 Nationwide Housing Shortage
Nationwide we are short 10 million homes for the demand that we need in terms of the rise in population. If inflation continues, we may even see builders pull back because of the cost of supplies which would only exasperate this issue. So for those that are concerned about the value of the home they are looking to buy or just purchased, and are worried about home prices dropping, this is very unlikely situation.
🧐 How Would a Recession Affect the Market?
Now I am not an economist, but I study these things in depth. If we look at the graph below, every time we’ve had a recession in the last 20 years you’ll notice that home values have actually remained stable and have even gone up. This excludes the last housing bubble we had in 2008 & 2009, but let’s face it, that was a much different time. So, with the exception of The Great Recession, every recession we’ve had, real estate has remained strong and in many cases gotten stronger shortly after the recession concluded.
📞 Let’s Chat
I hope this information was helpful for you. If you have any questions about housing, mortgages, or real estate, please know I am always available for you. I hope you and your family are doing well. Have a great day, God Bless and Happy Easter.