Is it the right time to buy a house? Realtors talk about mortgage rates

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Eager to downsize her longtime home, one of Connie Dornan’s clients finds her options surprisingly limited.

The house is big and beautiful, and would sell in a heartbeat, Dornan, an @properties agent, told Inman.

Connie Dornan

But almost everywhere Dornan’s client looks in the Chicago area, they are unable to find a suitable place to own or rent that would be cheaper than just staying put.

The “problem”, if you can call it that, is that the client’s mortgage is so affordable to begin with. Her current loan rate is below 3%, she said. “Downgrading” to a less expensive property would involve a significant increase in his mortgage rate.

“It doesn’t seem very beneficial for him to sell his house right now, although I could sell his house for top dollar,” Dornan said. “That’s where would he go, that’s the problem; and at what price?

The ‘lock-in effect’ – the impact that rising mortgage rates could have on inventory for sale – is one of the reasons why economists at Fannie Mae predict a 9.7% drop in home sales next year.

As Fannie Mae Chief Economist Doug Duncan recently stated, “Households with a 30-year, 3% fixed-rate mortgage are unlikely to give it up in favor of a closer mortgage.” by 5%.

This downsizing scenario is just one of many difficult challenges posed by rapidly rising mortgage rates that agents must help their clients navigate, according to agents and brokers who spoke with Inman.

Here are their tips to help customers overcome these issues.

Meet your customer where they are

Coupled with rising home prices, increases in mortgage rates create unique issues for each type of buyer.

Rates on 30-year conforming loans rose above 5.5% on Tuesday for the first time in years after months of rapid growth, according to digital market Optimal Blue.

Alyssa Hellman

Customers who have been through the home buying process often remember a time when mortgage rates were higher than they are today, said Alyssa Hellman, realtor at My Southern View in Raleigh, North Carolina. This may make it a little easier to guide them through today’s rate increases.

But the volatility of the mortgage market – where rates have risen from less than 3% to more than 5% in a matter of months – remains shocking, especially for first-time buyers, she said.

“Any buyer in any market is used to some sort of fluctuation,” Hellman said. “But it was the speed at which rates rose and soared that caught people off guard.”

This changing environment led some of Hellman’s buyers to ask him if now was really the best time to buy.

“They’re just trying to make sense of it,” Hellman said.

Customers sometimes ask if it would not be better to wait until the end of the market.

“The last time we saw anything remotely like this was in 2006 and 2007, leading into 2008,” Hellman said of what buyers are seeing. “My personal opinion is that they are going to wait a very long time for this.”

For one, a 5% mortgage rate is still low by historical standards, Hellman said. For another, buyers remain more qualified to take out loans than they were on the eve of the 2008 housing crash.

Focus on the big picture

Becco Zou

Becco Zou

This historical context is one of the first things Becco Zou shows clients when they express concerns about mortgage rates.

Zou is a Compass agent in the Seattle area, working primarily with local and overseas Chinese clients. When her clients express concerns about rising mortgage rates from their pandemic lows, she pulls out a chart of mortgage rates that goes back decades.

This graph reflects the reality that prior to 2009, a 30-year fixed mortgage rate as low as 5% was virtually unheard of. Rates spent most of the 1980s in the double digits.

If his buyers are looking for a primary residence, Zou advises them not to fear today’s interest rates. For investor clients, giving advice is more complicated and depends on their risk tolerance, Zou said.

“I have buyers who keep buying with my encouragement,” Zou said. “I see myself as a resource for them. They are the final decision makers. »

push away the regret

Sam DeBianchi

Sam DeBianchi LaViola said some of his South Florida clients have regretted not getting homes sooner because they struggle with the idea that better buying opportunities might have passed them by.

“Obviously people who didn’t buy six months ago are kicking themselves and wishing they had bought,” said DeBianchi, president of DeBianchi Real Estate. “It’s a mixture of ‘Damn, I wish I had bought this house’, but also ‘I wish I had bought this house to lock in this rate.'”

But on the contrary, DeBianchi’s clients have not been deterred by rising mortgage rates. In fact, they are more eager to move quickly to buy in order to anticipate future rate increases, she said.

“A lot of people still have the mindset that they want a home, they want to put down roots,” DeBianchi said. “I have a long list of buyers right now, and all of them are ready to pull the trigger as soon as we find something.”

Yet it is becoming increasingly difficult for buyers to make a home purchase work within their budget.

Mortgage data and technology provider Black Knight said this week that if rates rise another half a percentage point – or house prices rise another 5% – affordability will hit the worst levels on record. . And in about a third of the country, it already is, Black Knight reported.

Stay in touch with the lender

The volatile rate environment also increases the importance of locking rates early, Hellman said.

Until recently, Hellman didn’t feel the need to frequently check with his lender where interest rates were heading. Rates just haven’t fluctuated much from day to day.

Things are different now.

“It’s never been more important to have a close working relationship with a lender you know and trust,” Hellman said.

Along with checking rates for her clients, she said it’s critical to stay on top of the rate lock process with the lender. When the timing of the transaction and the mortgage rate make sense to the buyer, the client shouldn’t delay locking in the rate, she said.

Both DeBianchi and Hellman have also advised clients to ask their lenders for variable rate options, and some have started going down this route in recent weeks. These products fell out of favor after the housing crash, but can be a way for people who plan to refinance or move in a few years to lock in a more affordable monthly payment in the meantime.

Take the challenge

Increasingly difficult market conditions have also made it a little harder for agents and mortgage brokers to impress clients, DeBianchi said.

Earlier in the pandemic, the options were simply better for the typical buyer. Prices were rising rapidly. The inventory was not in great condition, but it was at least better than the current market. And if the customer didn’t feel like they were getting a good price on a home, they were at least likely to get a historically low mortgage rate.

From a buyer’s perspective, all of these factors have since changed for the worse.

Agents, DeBianchi said, “don’t look like those amazing people anymore, as far as saving the day is concerned.”

But their expertise is just as important, she added.

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