Mortgage Rates are Pushing Towards 7%

mortgage rates are pushing towards 7%

Rising rates and stubbornly high housing prices are putting many would be buyers on the sidelines.

Mortgage rates are pushing towards 7%. Homebuyer activity is already at a 28-year low, and the latest surge in rates is making things worse. Would be buyers are feeling the pinch of higher potential payments while home prices remain stubbornly high.

Current Rates

Rates climbed a half point in February bring the average rate on a 30-year mortgage 6.65%. This is a reversal from prior months, as rates have been falling since November.

The national median list price for a home is currently at $415,000. While that is down from the peak of $449,000 last June, it is still up from $406,000 a month ago in January. Rising home prices along with a rise in rates are squeezing would be buyers out of the market.

This rise in home prices and rates makes the average mortgage $630 a month more expensive than a year ago. That is a 45% increase. Inflation is up only 6.4% in comparison.

Sitting on the Sidelines

It is no surprise that buyers are backing out of homebuying, as the current environment makes the prospect of homeownership out of reach for many. However, it is interesting to note that sellers are also starting to sit out. Rather than drop their listing price, they are simply taking their homes off the market. This is causing a further reduction in inventory, which is in turn keeping prices high.

According to listings are 16% lower than they were this time last year. Overall, new listings are 27% lower than pre pandemic levels from 2017 through 2019.

To add to the pain, existing homeowners are reluctant to put their homes on the market, because they don’t want to give up their current low rates. They are also not willing to cut their selling price. This is causing people to stay put as opposed to making a move into a different home.

What Can You Do?

If you are in the market for a home, what can you do to combat the current environment? Your best strategy is to have a large downpayment and have the rest of your finances in order. Buying a home with a minimal downpayment while having other debts and little savings is a recipe for disaster.

My advice is to buy a home with at least 20% down and clean up all your other debts before purchase. If eliminating all other debts isn’t possible, then at least pay off consumer debts like credit cards and personal loans. A 30-year mortgage is okay, but a 15-year is better.

Finally, have ample cash available for the expenses that you will incur after buying. Many forget to budget for renovations, upgrades, and furniture. Don’t go into debt for these items. Having cash on hand will keep your mortgage payment more manageable.

Wrapping Up

Mortgage rates are pushing towards 7%. Inventories are low, and prices are stubbornly high. It is not a good environment for a would-be homebuyer, but if you are in the market, you can be prepared. Your best strategy is to clean up your finances, save up as much cash as possible, and be patient.

Read Also:

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