Interest rates continue to rise with the 30-year fixed-rate mortgage averaging 5.85% (bankrate.com). The last time rates were this high was in 2008. With the rising rates and high home prices, it’s hard to predict how the market will react. What does this mean for home buyers? Here are some tips on navigating the current real estate market in Bozeman with the rising mortgage rates.
With the recent headlines and the reality that mortgage rates have increased by more than 2 full percentage points since the beginning of the year, it’s easy to get caught up in the hype. However, it’s important to remember that rates are well below historical highs. Rates remained above 10% throughout the ’80s reaching 16.63% in 1981. (themortgagereports.com) The quick increase we’ve recently seen is causing buyers to be cautious which is a normal reaction. Experts predict that we will likely continue to see increases in interest rates throughout the year so if you have been considering buying a home, sooner rather than later will give you more buying power.
The rapid increase in home prices these last few years have been intense, partially because of the record low-interest rates and the increased number of buyers. What we expect to see now are home prices stabilizing. For the first time in two years, we saw the median sales price decrease in Bozeman. Demand for homes may moderate now which means we should stop seeing the huge price increases. In certain areas of the country, like Bozeman, there is still plenty of demand for people wanting to move which means we probably won’t see huge price drops, but some leveling off is expected.
We are finally seeing an increase in homes for sale in Bozeman which is a relief to many buyers. Looking at homes that have been sitting on the market for a while means the seller may be more willing to negotiate on price or offer closing credits. Either of these will help bring down the amount you have to borrow and lower the interest you have to pay on your loan.
We have been in a very hot real estate market for over two years. Getting to a more sustainable market will take some time. Higher interest rates mean higher monthly mortgage payments for home buyers continuing to make it hard for anyone already at the top of their budget. This isn’t going to change overnight. With time, supply and demand will balance out which we haven't seen for the past several years. This should lead us to a healthier market with more options for buyers. Spring and summer are the busy seasons when it comes to real estate making it a more competitive time to be a buyer. There is the option to wait until fall or winter when there are fewer buyers if you are willing to accept that rates will most likely continue to creep up this year.
Mortgage rates are high across the board which makes shopping around to find the best rate on the loan program you want even more important. There may not be much difference between lenders, but even a small amount can make a big difference. If you can swing it, making a larger down payment will reduce the amount you need to borrow which will lower the associated interest to be paid on the loan. Most financial experts also recommend locking in a rate sooner rather than later because rates are expected to continue to rise. With rates changing quickly make sure you have reapproval with your lender every few weeks so you are ready when you decide to make an offer.
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