Affordability and mortgage rates go hand in hand. That said, their impact goes deeper than some might think.
Many are quick to point out that interest rates were once hovering around 18%, and that today's single-digit rates are incredibly low by comparison. This is true. The difference is that when rates were that high, homes were also much less expensive.
Today, prices have gone up considerably. Therefore when rates rise by even a single percent, it makes a big difference in affordability.
As mortgage rates continue to rise, we’ll begin witnessing a few key consequences with increasing frequency. For one, a large number of buyers will be priced out of the market. These buyers will be forced to either move their search into lower price ranges or stop looking altogether.
For homeowners who locked in an extremely low rate, the decision to move to another home is not one to be made lightly. These homeowners will find it difficult to rationalize buying a new home if it means accepting a much higher rate, unless they have a pressing enough reason to move.
In other words, rising rates can result in a drop of both buyer and seller activity.
With that said, rates have temporarily dipped. Now is a perfect time to enter the market if you’re interested in buying or selling before they rise once more.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.