Many of us in the real estate profession have been keeping a watchful eye on the Federal Reserve. Due to efforts to keep inflation at bay, the Fed recently raised mortgage interest rates, which now exceed 7%. This is the highest 30-year fixed mortgage interest rate since April 2002, making it the highest rate in more than 20 years.
While a 7% interest rate might seem high compared to the historically low rates from previous years, it’s important to approach this figure with some perspective. Yes, these rates we’ve been experiencing in the past few months have been higher than what we’ve been used to, but there have been periods in the past where interest rates soared into the double digits. Any fellow Realtors can remember 18% rates in the 1980s? And homeownership remained a cornerstone of personal financial growth even when rates were much higher.
Higher rates mean increased monthly payments compared to lower rates, but it doesn’t undo the long-term benefits of owning a home. Building equity and various tax benefits are still very much part of the equation. When looking back over markets that experience higher interest rates, one sees that this could lead to more stable property prices, which could potentially offset some of the interest costs.
Also, it’s important to consider your personal finances and long-term goals. If you’re a potential homeowner who’s financially stable and sees owning a home as a long-term commitment, a slightly higher interest rate over the long run might not have a big effect years from now. As I mentioned, rates fluctuate, and refinancing when rates become more favorable might be an option to pursue.
So, how are these rates currently affecting homebuyers looking to enter the housing market? Dr. Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, says the rate translates into a mortgage payment for a single-family home of $2,234 and $1,942 for a condo.
“The increased mortgage rate exacerbates housing affordability as home prices climb in this limited inventory environment. Something has to give for rates to come down, and that something is the next decision by the Fed,” adds Lautz.
Yes, current mortgage rates are higher than those in recent years, but funnily enough, one thing that has remained constant in recent memory is change. The housing inventory has fluctuated. Prices have changed. It’s important to realize that markets and rates shift over time, which is why it’s also important to consult a Realtor to help in your particular homebuying and selling needs. Understanding the current market in a particular area is exactly the type of expertise a Realtor can provide.
Realtors help guide their clients through the sometimes-dizzying process of buying or selling property. That’s Who We R.
Founded in 1912, Greater Chattanooga Realtors is the voice for real estate in Greater Chattanooga. A regional organization with more than 2,700 members, Greater Chattanooga Realtors serves Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and boards of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a multiple listing service, which is one of approximately 600 MLSs in the country and services more than 3,000 users. Local association membership consists of Realtors servicing the Greater Chattanooga area and specializing in a variety of disciplines – appraisal, commercial, industrial, land, multifamily, property management and residential. Working alongside Realtors are our affiliate members, who represent related industries in sympathy with the objectives of the association. Our affiliate members include mortgage lenders, home inspectors, title and closing services, pest inspection and control and insurance.