Real Estate Report:
With the Federal Reserve raising interest rates last week by a quarter of a percentage point and signaling that the central bank is on track to raise rates twice more in 2018—homebuyers should pay close attention to interest rates and how it will affect their purchase power.
Mortgage rates are at the highest levels that we’ve seen over the past 4 years, and while some buyers will not be affected by quarter, half or even a whole point rate increase, first time buyers should definitely pay close attention.
“First-time buyers are typically people with a tighter budget,” says Joseph Kirchner, realtor.com®’s senior economist. “They’re looking for homes on the more affordable end of the market, but that is where the lack of homes is most severe. … There’s plenty of demand, but people just cannot find a home on the market that meets their needs and they can afford. It’s not a good start for the spring market. The shortage will continue.”
Realtor.com® offers this example on what an increase in interest rate means to your bottom line: On a $300,000 house with a 30-year fixed-rate mortgage and 20 percent down payment, the difference between a 4 percent and 5 percent mortgage rate is $142 a month. Calculated over the life of the loan, that is more than an extra $51,000.
Also, housing inventory is tightening up in most areas. This is spurring more competition on listings, and with having to offer more on a home (sometimes in a bidding war), many homebuyers are being priced out of their market. This coupled with rising interest rates makes it a harder job to find the right home for the right price for first time homebuyers.
“It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth,” Lawrence Yun, National Association of Reatlors’s chief economist, said in a statement.
Lauren Bunting is a licensed Associate Broker with Bunting Realty, Inc. in Berlin, MD.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
