Will the 5% rate become the new norm?
The MBA has announced that mortgage applications have dropped at the beginning of February, which appears to be the opposite of what we saw when we looked this time last month. Purchase applications decreased while ARMs increased, drawing a sensible conclusion that this is a direct result of the rising interest rates.
As rates continue to rise, some are starting to ask what a 5% interest rate would bring to the housing market. Has creeping over the 4.5% mark for the first time in a while caused some to hit the panic button? Housing affordability is becoming tougher, so will buyers and sellers be less reluctant to act?
Fewer sellers could cause a spike in home prices and could drive more towards renting or even tiny-home living. Now, there is a possibility we will not see such a substantial change in the short term because some will move with more urgency in fear of even higher interest rates ahead. Hopefully, the pressure from both sides can try to keep the housing market at an even keel and figure out how to get more Millennials to buy homes! Easier said than done, especially now that rising interest rates are top of mind… as if our student loan debt and our general unwillingness to commit wasn’t already enough to work through 😊!
Thanks as always,
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.