If you’ve been sitting on the sidelines thinking to yourself that surely the bubble must burst and home prices will drop, think again. With the first Federal Reserve interest rate hike, more buyers are flocking to the market, driving prices up nearly across the board.
Prices are being further driven by inflation, which is the highest in thirty years.
So where are prices expected to be by the end of the year? Fannie Mae and Freddie Mac have similar market projections of 7.4% and 7%. The Mortgage Broker’s Association has a considerably more conservative outlook of 5.1%. None of these figures compare with Zillow’s incredible forecast that home prices will increase an average of 11% this year.
Only time will tell, but what all these projections have in common is that prices will keep increasing this year. The train is leaving the station, and if you don’t hop on, you may miss your chance. If you’re concerned about a market correction, this year is not the year it will happen.
But if you’re a hesitant homebuyer, rising purchase prices shouldn’t be your only concern. The Federal Reserve announced that 2022 would see an astounding seven interest rate hikes. If you’ve been waiting to buy a home, these rate increases should be more concerning than home price growth.
If consumer mortgage rates increase 1%, it might not seem like much, but it could result in hundreds to thousands more in interest payments each month.
Let’s consider an example. The average mortgage of a US homebuyer is $453,000. An increase from 4% to 5% would mean that the homebuyer will pay over $350 more each month in interest payments.
However, it’s not just mortgage interest rates that are increasing, but home values as well. As a result, those who wait to buy will see a compounding effect that will likely make it harder for them to get the house they want.
The last thing that hesitant buyers need to remember is that residential property is an excellent hedge against inflation, and with inflation pushing 8%, that should be an attractive selling point. Your home tends to increase in value with inflation. Realistically, if you have the capacity to become a property owner in today’s market, you want to make it your priority. You could almost say that there has never been a better time to be a homeowner with a fixed interest rate. Get in touch with a member of our team today so you can get pre-qualified and start your property journey.
