Wilmington, N.C- If you’re honest, most of us are not financial experts. We own stocks, we’ve built a portfolio and we’ve done our best to plan for the future.
But ask us to predict what Wall Street will do in a month, or to explain the inner operations of the Federal Reserve, and most of us- if we’re honest- are at a loss.
We get by on the basics. We know that when the FED raises the interest rates, it becomes more expensive for us to borrow money- with the most obvious example being a 30-year fixed mortgage.
According to Freddie Mac at the end of October the U.S. rate for a convention home loan reached a 20-year high of 7.08%. That’s more than double from where it stood one year ago.
The larger the interest rate, the higher the monthly payments. The higher the payments, the more questions from potential buyers.
“Of course this gives buyers reason to pause,” said Scott Saxton of Just For Buyers Realty. “You need to pull out the calculator. You need to ask yourself some questions. You may no longer be able afford everything on your wish list. You need to prioritize and figure what’s important to you.”
Several published reports estimate that on a $350,000 home loan, a monthly mortgage payment is now an additional $927 per month compared to late 2021.
With such a significant increase, how do you know if the time is still right to get into the housing market? Saxton says your answer comes down to just one question.
“If the math is right, then the big question becomes; How long are you going to stay in the house? If it’s for only a year or two, I would be hesitant. But the longer you stay, the better odds you have that things will fluctuate.”
According to The National Association of Realtors, the average amount of time a buyer stays in their home is just slightly over 13 years. Many of those people know that there is a difference between the house and how you finance it.
Home owners who are planted for several years may eventually see the interest rate drop, and those in good standing always have the option to refinance their loan.
“This is a complicated time, but there’s lots to be positive about,” said Saxton. “We’re seeing more offers being accepted, there are fewer bidding wars, homes are staying on the market longer, and for buyers the playing field is equaling out.”