Tuesday, October 19, 2021 - by Robert Backer, president, Greater Chattanooga Realtors
Over my years as a Realtor, I’ve noticed that the first thing homebuyers look at is price. As obvious as this observation may be, significant issues can arise when price – not financing – is the only consideration.
It might not seem like a big deal, but locking in an interest rate when the rate is lower can potentially make thousands of dollars difference in the lifetime of your mortgage, and could change your monthly payment by hundreds, which could make your dream home unaffordable or not.
And the simple fact is that home prices won’t be seeing any dramatic price reduction in the near future. So locking in a favorable mortgage is one of the best ways to make sure you get the most for your homebuying dollar.
Speaking of mortgage rates, they rose sharply above 3% this past week, the highest since April, as consumer and producer prices continue to inflate due to persistent supply bottlenecks and labor difficulties. According to the finance mortgage provider Freddie Mac, the 30-year fixed mortgage rate moved up to 3.05% from 2.99% the previous week. So it seems that rates at the 2% range are over.
A question that pops up for millions of homeowners is whether it is a good time to sell their home. People typically sell their home after 16 years, according to the U.S. Census Bureau. Meanwhile, there are about 20.2 million homeowners that purchased their homes in the last 10 to 19 years. Thus, many of these homeowners may wonder if they should sell their homes now or wait. Here are a couple of big reasons why it’s a good time to sell.
Nadia Evangelou, senior economist and director of Forecasting for the National Association of REALTORS (NAR) explains it like this:
“First of all, there is no doubt that it’s a seller’s market. Although the market typically slows down in fall, there is still stiff competition among buyers, with multiple offers for each home due to low inventory. As a result, sellers continue to have strong negotiating power as most of them are able to sell their home for higher than the asking price. Comparing sales volume with current inventory, we are also seeing that homebuying activity is very strong. Specifically, more than half of the inventory was sold in August since the sales to inventory ratio was 0.51. Nevertheless, the sales to inventory ratio was only 0.07 back in 2009. Remember that a higher ratio implies a seller’s market, while a lower ratio implies a buyer’s market.”
“Secondly, mortgage rates are still historically low while the outlook is for higher rates in the upcoming year. With lingering inflation, the Fed may start tapering earlier than expected. Specifically, the Fed recently announced that it will begin gradually decreasing its purchases of long-term Treasuries and mortgage-backed securities before the end of the year. Moreover, the Fed will also raise interest rates by the first half of 2022 in order to control elevated inflation. Both of these strategies are expected to move up mortgage rates in 2022. The National Association of REALTORS® forecasts the 30-year fixed mortgage rate will reach 3.6% by mid-2022.”
So if you happen to be on the fence about purchasing a home, the recent increase in new listings and lower than projected interest rates might mean it’s time to act. Whether you’re buying or selling a home, utilizing a Realtor is the best way to ensure that your best interests are being taken into account. We love and serve our community’s real estate needs every day.