Are mortgages rates too high? Apparently, a lot of buyers think so. As a result, many are sitting the sidelines waiting for them to drop. Let’s first look at some quick mortgage rate history.
Mortgage Rate History
Freddie Mac provides mortgage rate history going back to 1971 when rates averaged 7.5%. In the 1980’s the rate skyrocketed reaching a peak of 18.63% in 1981. In the 90’s rates settled down and averaged out around 6.49%. In the 2000’s, rates came down following the subprime lending market crash and averaged around 5%. In the 2010’s the rates started around 5%, bounced around and ended around 5%. Then we all know that Covid hit, and rate fell to historic lows. Today’s rates are hanging in the 7% for a 30-year fixed mortgage. The predictions for next year are for rates to settle somewhere in the 5’s by the 3rd quarter. Historically, this is where rates like to hang barring atypical events.
Is Now a Good time to Buy?
Now I’m going to tell you that this is a good time to buy even with rate in the 7’s. Why is that? When rates were low sellers were in charge. They were not giving any concessions. They offered no help with closing costs, only made repairs necessary for the buyer to get a loan, many received over asking price and many asked to leased back their homes. I had one seller who after getting $30,000 over their asking price, also got to stay in their home for 2 months past the closing date for free! Not to mention buyers had to make split decisions on whether to make an offer. The idea of sleeping on it or going back for a second look were out of the question.
The landscape has changed. Buyers have more homes to choose from. Sellers are accepting offers below their asking price, agreeing to make repairs, and many are offering to pay $10 – 15,000 for buyers’ closing costs and prepaids. Some are even offering to buy down your mortgage rate. Add that all up and you can see some serious savings along with taking your time to find the perfect home for you.
Predictions for the Near Future
The lack of competition now means that when mortgage rates do ease, buyers can expect a flood of pent-up demand to wash over the market. Real-estate experts say high mortgage rates are probably here to stay for some time, and even if they drop below their current elevated levels, a return to the days of 3% is unlikely. This is especially true as the Federal Reserve maintains its outlook for higher-for-longer interest rates to keep a lid on inflation.
Are mortgage rates too high? They are higher than we would like and are likely to start coming down later next year. However, they are not too high for getting seller to negotiate and refi later. I say take advantage of sellers not having the upper hand. Buy when and what you can afford. Marry the house, date the rate!
Call me today if you are ready to look and work a deal!
Real Sign used by a client of mine when their home was for sale in the 80’s!