No two ways about it. Interest rates are on the rise. And they show no sign of falling anytime soon. Just yesterday, Freddie Mac announced that interest rates for a 30-year fixed-rate mortgage rose above 4% for the first time in almost two years. So, if you wish to buy a Jersey Shore home this year, I suggest you lock in your interest rate as soon as possible.
Higher Interest Rates Affect Home Buyers
Higher interest rates translate to a higher monthly mortgage payment. Exactly one year ago, Freddie Mac reported a 3.09% rate for a 30-year FRM. Yesterday, they posted it at 4.16%, over 1% higher. On a $500,000 mortgage, today’s buyer pays just over $300 more per month than they would have one year ago. And experts predict that it will only go up from here.
The Federal Reserve’s Role
Just this week, the Federal Reserve raised their rate for the first time in four years. They also suggested that we may see additional increases as many as six more times by the end of the year (once for each time they meet for the remainder of 2022). While the Fed’s rate does not directly affect mortgage rates, it does affect homebuyers in other ways. Credit cards and other short-term loans follow the Fed’s benchmark rate. So, if you buy a car or take out a HELOC for that kitchen remodel, you pay a higher interest rate when the Fed’s rate goes up.
Inflation and Investors
It appears that inflation will continue to rise in the US for the remainder of the year as well. While Ukraine seems so far away from us here, the war going on there also affects our economy. The cost of oil is on the rise, increasing the price we pay at the pump. In turn, this increases transportation costs for all goods and services as well our daily commute to work. Additionally, this lessens the amount of our household’s disposable income. Investors are watching how the conflict is playing out, too. We see the outcome of this in the stock market. All of this has an effect on consumer spending. That includes how much we can afford to pay for a Jersey Shore home.
The bottom line is this. Homebuyers cannot stay on the fence for long in deciding whether or not to buy a home. If you wait, it will only cost you more. Just like mortgage rates, home prices look like they will continue to go up over the next several months. When you are ready to start looking for your next home, contact me.
Sherri Lilienfeld, Apex Prime Realty, Your Source for Jersey Shore Real Estate