Mortgage rates are on the rise and are expected to rise in 2022
SIOUX FALLS, SD (KELO) – We’re only three weeks into the new year, but mortgage rates have already risen about half a percent since January 1st— and industry experts expect the upward trend to continue all year.
“When interest rates go up, it really affects any buyer in the market right now,” said Tyler Goff of Hegg Realtors.
In his 15+ years in real estate, Tyler Goff has found that the home buying process typically takes about 90-120 days from getting your first mortgage approved to closing on a home. Potential home buyers stuck in this window right now are seeing a big impact.
“If they’re quoted a lower rate now for their payment, then in the process that interest rate goes up, well, that moves the goal post in the field a bit,” Goff said.
“At the start of the year, rates were around 3.25%, now they’re down to around 3.75,” said Kevin Carlson, Plains Commerce’s senior mortgage banker.
While half a percent may not seem like much…
“Let’s say a loan of $250,000, which is about the average price of a home in this area, will be an upside of about $70/month,” Carlson said.
…it makes a big difference to how much homebuyers can afford.
“For the same payment, instead of a $250,000 house, it’s now a $235,000 house. So over the last month people have lost about $15,000 in buying power for this price range,” Carlson said.
Carlson says the industry is bracing for an even bigger impact throughout the year as the Federal Reserve scrambles to fight inflation.
“Since the start of the covid response, they’ve intentionally kept interest rates low,” Carlson said. “Now the Fed is starting to take a thumbs up off that ladder, so we’re starting to see the effects of that…and it’s not going to stop, it’s only going to escalate. We expect rates to interest continue to grow,” Carlson said.
But even as rates go up, Carlson says it’s important to keep perspective on how those rates compare to past years.
“Rates are going up from where they were, but historically speaking, except for the last few years. These are still the lowest rates we have seen,” Carlson said.
“Really, over the last two years they’ve been at historic lows that were unprecedented,” Goff said. “There is therefore reason to believe that interest rates will rise this year.”
As rising rates add pressure from a housing market that has already seen a roughly 20% increase in house prices over the past year…
“The demand in Sioux Falls is only going to grow more and more,” Goff said.
The folks at Real Estate agree that now is always the best time to get into the growing real estate market if you want to get a new home and a low mortgage rate, before prices go up even more. .
“As home values increase and interest rates continue to rise, this will affect home affordability. The flip side is that we’re also seeing rents rise at astronomical rates,” Goff said. “If you want to lock in your monthly payment, buying and using a mortgage to do so is a smart way to lock in your monthly payment amount for your home.”
That’s easier said than done in this competitive real estate market, where Sioux Falls is seeing one of its lowest inventories of homes available for sale.
“To people in the market right now, I would say don’t give up hope. There are people every day, people are winning auctions. Simply because we expect interest rates to rise to going forward, the sooner you can lock in a mortgage, the better,” Carlson said.
While competition may mean fewer choices, Goff says, even in this competitive market, he’s able to get most customers into a home within the same 90-120 day turnaround time he always has.