(WXYZ) — The 2022 home buying forecast is shaping up to be a new ball game for prospective buyers.
Driven by inflation, the interest rate on the most popular home loan surged by the most it has in nearly two years last week, shooting above the 4 percent level. And it comes as the federal reserve prepares to lift rates even further next month.
So what does that mean for your wallet if you’re in the market to buy? Should you wait until the spring/summer season, or strike now?
Mark Clark is ready for a move. We found him looking in Clinton Township at what could be his forever home.
It’s a big decision, but he’s starting to feel he’s got little time to figure it out.”Seems like it’s a good time to buy, just before interest rates rise,” said Clark.
Clark and thousands of other prospective home buyers across metro Detroit are now in a race against the clock— to buy a home before mortgage rates run amok in an already hot market.
“If the interest rates bump up a bit, and it’s only $20-30, it’s doable, but if it’s much more than that, it starts to put a strain on my budget,” said Clark.
Last week, the Mortgage Bankers Association said its weekly measure of the average 30-year fixed rate climbed to 4.05 percent, up from 3.83 percent just a week earlier—much of it driven by inflation.
It’s the highest rates have been since October of 2019— all of it landing on buyers just ahead of what’s expected to be an aggressive hiking campaign from the fed that’s slated to begin in March.
The hope for some is that rising rates will help slow down the wild competition that has come to define the market in last couple of years. That said, home prices are expected to rise by 11 percent in 2022. So many real estate professionals are urging their clients to act now rather than wait for the unknown.
President and Principal Broker of Nerg Real Estate Experts Maynard Neal says now may be the sweet spot.
“You’re starting to see more homes come onto the market now and if you were to wait, there will be more buyers,” said Neal.
It will give yourself the chance to avoid the spring/summer craze.
“Once the grass is green, they’re coming out, they’re looking to make more moves before the school season starts in September,” said Neal.
And the unknown of how high rates will climb. Goldman Sachs economists now expect the fed to raise interest rates seven times this year to contain surging inflation.
We wanted to know how that could impact the wallet, taking a look at the numbers:
You’ll find that on a 30-year loan, for a $200,000 home — a 3.75 percent rate gives you a monthly bill $1,407 dollars, but if the rate ticks up to 4.5 percent, which is possible, well then your payment jumps to $1,484. It’s a difference of $77 a month, nearly a thousand dollars more a year ($924).
“There’s the possibility that they price themselves out of the market,” said Margaret Serafano, Mortgage Loan Originator with Simple Home Lending. “They may have to come down, 50, 20, 10 thousand, depending on where they are in their purchasing.”
“If prices go up, I may not be able to get as much house as I would have liked,” said Clark.
That’s why experts say buyers should get pre-approved; it’s the best way to avoid getting squeezed by rising rates and instead seize what the market has to offer.