Welcome back! We’re talking about affordability, inflation and the spring housing market in this second edition of The Morty Report. My priority with these weekly newsletters is to share the info you need to know to make informed homebuying decisions. Share your feedback with me anytime at MortyReport@morty.com, or on Twitter @RobMortgages.
— Robert Heck, Vice President of Mortgage @ Morty
What to know now
- Rates have climbed sharply upward this week to post-pandemic highs, but the spring housing market is expected to remain hot.
- Rates improved briefly upon oil and inflation relief last week, but climbed back up and have now surpassed the highs we previously saw on March 25.
- Rising rates could impact affordability and lower buyer demand – something sellers should keep an eye on, too.
- Inventory remains low, which has sustained demand even as rates cut into affordability.
- You can check out today’s rates here, if you’re interested
What to do
Thinking about buying for the first time? Continue to get pre-approved at updated rate levels to ensure that the homes you’re considering remain in your price range. You can also expect to pay a premium for location and compete with other repeat buyers in the process, which could lead to potential up-bidding – so don’t forget to account for those factors when setting your budget. If the rate increases over the past month mean you need to reduce your budget, this may be a sign that you should step back and consider improving your overall financial profile.
Is spring the right time to sell? Seasonality has become less of a factor for buyers and sellers, but it really depends on your individual situation and reason for selling. So far, rates have yet to move high enough to stall home price growth or cut into buyer demand relative to the current supply, which is generally good news for sellers. But you shouldn’t necessarily rush to sell in a tight timeframe or take the first offer you receive, either. Whatever you decide to do, you want to be intentional that the equity you’ll receive is worthwhile.
Worried about inflation? Interest rates are rising to reflect the overall strength of the economy and combat inflation, and pandemic-era policies and secondary market activity that kept rates at historic lows have ended. While inflation can negatively impact your buying power in the moment, it does mean that the cash you have now is more valuable than it will be in the future, given the nearly 8% inflation rate. This means it could be more cost-effective to buy now and borrow when it comes to maximizing the value of your dollar.
Factors influencing the market
Affordability is top of mind for many right now. Home prices, inflation and mortgage rates are all on the rise as we head into the spring market. Add in fierce competition in the market and limited housing supply, and for some buyers it feels like the dream of homeownership is slipping further and further away.
We talked a lot about market volatility in the last issue as rates climbed upward – and the trend continued this week. Rates increased quickly and even hit new highs for the year, with some benchmarks hovering near 5%. Inflation concerns continue to be the primary driver of rising rates in the market, and commentary from the Federal Reserve around their actions to combat it have largely driven this week’s shifts.
If you’re in the market for a home, research what your affordability looks like at different rate levels, from where things sit now to above 5%. Affordability also largely depends upon your timeline to having an executed purchase contract. More than ever, buyers should be laser-focused on planning for all the expenses that go into owning a home right now — think insurance, taxes, maintenance — and not just a mortgage.
It varies by market, but rates in most places have yet to move enough to outweigh the limited inventory and resulting demand we’re seeing overall (an important note for anyone planning to sell, as well).
Reader Question of the week
I’ve been googling “daily mortgage rates” to track rate changes every day. Is this actually an accurate way to find out what my rate would be? – Casey T. in Raleigh, North Carolina
The results you’ll find with a search engine can give you an idea of where the market stands that day, but it won’t necessarily give you the full picture or the best rates available. A mortgage marketplace like Morty shows you rate options from multiple lenders all in one place. You can even use Loan Options, our interactive quote tool to get personalized quotes with your monthly payments and closing costs already calculated. Quotes are adjusted in real-time and delivered to your inbox, making it a great way to track daily market changes. Buyers should keep in mind that quotes are different from fully qualified rates, which require a credit pull and income/asset information that is provided during the qualification process.
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