Fed rates went up…but Mortgage rates are down

You may have seen in the headlines that the housing market is different now than this time last year. For one, between March and October, the interest rate on new 30-year mortgages rose from the mid-3% range to over 7% - a steep increase.

As a result, we saw some buyers take a pause from their searches, and some sellers postponed listing. This effect was more noticeable in certain segments, such as new construction and smaller condos, while demand remained high for perennially hot segments, such as small to medium single-family homes.

Mortgage rates decreasing again…

And now a reason for optimism: despite the Fed having raised their rates again last week (for the seventh time this year), home mortgage rates actually decreased. Courtesy of Chris Butts, a loan officer at Leader Bank:

• Jumbo rates (loans of $726,201 and up) are almost back into the high 4% range! They’ve come down from the mid 6% range at one point a month or so ago.
• Conforming rates (loans of $726,200 and below) are almost back into the high 5% range after topping out in the low to mid 7% range!
• The initial interest rates for ARMs (adjustable rate mortgages) are now as low as mid 4% for Jumbo and mid 5% for Conforming loans depending on the product as well.

(If you’re interested in the technical explanations of how mortgage interest rates can go down while the Fed rate goes up, here is a good article: Federal Reserve just hiked interest rates for the 7th time this year – so why are mortgage rates coming down?)

“Date the Rate…Marry the house”

For those with the ability to make significant down payments or to pay with cash, the current environment, with fewer competing buyers, is something of an opportunity to snag a home with better terms. The saying making the rounds is “date the rate, marry the house,” meaning that while the house itself may be for the long term, you can always refinance the mortgage later if and when rates come back down.

Spring is around the corner

This time of year, from mid-November through February, is traditionally a slow time in real estate, and I expect that to hold true this year. There could be a flood of new listings in the spring, though, if mortgage rates continue to recover and buyers and sellers who were on hiatus return en masse. Either way, there are opportunities out there.

If you are considering buying or selling in the new year, or know someone who is, now or January is a good time for us to connect so that we can plan a winning strategy.