Interest rates are climbing. It is a trend that started last year. The average rate for a 30 year fixed mortgage was 2.65% in January of 2021. Rates have gradually increased since. They peaked for the year in December at 3.1% percent. Rates have continued to climb since the start of the new year and are currently 3.45% for a 30 year fixed mortgage.
Unfortunately this was coming. Real estate professionals have been telling prospective buyers to get into the market the past three years. Many potential buyers hesitated however because of rising prices and a lack of inventory. As result, it is going to cost more to buy now. While that may not be ideal,the reality is, interest rates are going to continue to climb. We are living in a time of high inflation and that another driving factor in interest rates going up.
The Federal Reserve is very conscious of inflation so rates will continue to climb unfortunately. This could have a domino affect as some buyers will be squeezed out from the current market. Long term, it could impact housing prices because it will lead to a lack of buyers.
A scenario like that would actually benefit buyers. If the buyer market dries up, it could lead to housing prices dropping. In many ways, that would be good for the market. It would balance things out, something real estate professionals have said needs to happen for the long term health of the industry.
The idea of rising interest rates is certainly a frightening proposition for buyers however, short term pain could lead to long term gain. It might be tough to buy a home in this market right now but rising rates will impact home prices. It is inevitable. When that happens, it could finally be the breakthrough many buyers have been looking for, especially first time home buyers.
As always, stay positive. The real estate industry is always changing. You can still buy the home of your dreams. It is a process. Stay the course.