With interest rates on the rise, when is the best time to buy a home in Metro Detroit?
(WXYZ) – The 2022 home purchase forecast is shaping up to be another ball game for potential buyers.
Driven by inflation, the interest rate on the most popular home loan rose last week in nearly two years, surpassing the 4% level. And it comes as the Federal Reserve prepares to raise rates further next month.
So what does it mean for your wallet if you’re in the market to buy? Should we wait for the spring/summer season or go on strike now?
Mark Clark is ready to move. We found him searching Clinton Township for what could be his forever home.
It’s a big decision, but he’s beginning to feel he has little time to figure it out. “Looks like it’s a good time to buy, just before interest rates go up,” Clark said.
Clark and thousands of other prospective home buyers in the Detroit metro area are now in a race against time to buy a home before mortgage rates shoot up in an already hot market.
“If interest rates go up a bit and it’s only $20 to $30, it’s doable, but if it’s much more than that, it starts to eat into my budget,” Clark said.
Last week, the Mortgage Bankers Association said its weekly measure of the average 30-year fixed rate had climbed to 4.05% from 3.83% a week earlier, largely due to inflation.
These are the highest rates since October 2019 – all of this lands on buyers just ahead of what is expected to be an aggressive Fed bull run expected to begin in March.
Some are hoping the rate hike will help slow the cutthroat competition that has defined the market for the past two years. That said, home prices are expected to rise 11% in 2022. So many real estate professionals are urging their clients to act now rather than wait for the unknown.
According to Maynard Neal, President and Principal Broker of Nerg Real Estate Experts, this might be the right place.
“You’re starting to see more homes coming on the market now and if you had to wait there will be more buyers,” Neal said.
It will give you the chance to avoid the spring/summer craze.
“Once the grass is green, they come out looking to make more moves before the school season starts in September,” Neal said.
And the unknown of how rates will climb. Goldman Sachs economists now expect the Fed to raise interest rates seven times this year to contain soaring inflation.
We wanted to know what impact this might have on the portfolio, looking at the numbers:
You’ll find that on a 30-year loan, for a $200,000 home – a rate of 3.75% gives you a monthly bill of $1,407, but if the rate goes up to 4.5%, which is possible, then your payment jumps to $1,484. That’s a difference of $77 per month, almost a thousand dollars more per year ($924).
“They may stand out in the market,” said Margaret Serafano, mortgage originator at Simple Home Lending. “They may have to go down, 50, 20, 10,000, depending on where they are in their purchases.”
“If prices go up, I may not be able to get as many houses as I would have liked,” Clark said.
That’s why experts say buyers should be pre-approved; it’s the best way to avoid getting stuck with rising rates and instead grab what the market has to offer.