Mortgage rates are on the rise, and it can add thousands to the cost of a new home. The average 30-year fixed rate loan has climbed from an all-time low of 2.65% in January 2021 to over 5.50% in the last week of August 2022.
A lot of different factors influence mortgage rates, but inflation is playing a big part in today’s market. Consumers have to carry the cost of higher prices for gas, groceries, and consumer goods.
To counteract high prices across the country, the Federal Reserve raised the rates that national banks use to trade with each other. Moves like this trickle down to consumers, and should result in less demand—and therefore, lower prices.
But when it comes to real estate, home prices have yet to adjust. Even with less homes sold across the country, the median sales price is up 10.8% year-over-year. The median home price reached $403,800 in June.
Homes that were considered affordable just a year ago are now out of reach for the average budget. So, what can future homeowners do about it?
Open your options
It’s easier to compete for homes if you’re flexible. Explore different neighborhoods, cities, or types of houses. Break down your checklist in regards to what you need versus what’s nice to have.
Bid in cash
Sellers love offers in cash because it usually means less risk and a faster closing time. Landis makes an all-cash offer on your behalf, so you can feel confident you’re putting in your best bid.
Adjust your budget
It’s a rule of thumb to spend 30% of your income on housing costs. For homeowners, that includes interest, taxes, and insurance. Go over your budget to make sure it measures up.
Plan to refinance
Interest rates are temporary, but your home is an investment forever. You can always buy your home now, then get a new loan with a lower rate (and lower payment) when the market is more favorable.
Historically, rates have always fluctuated. It’s smarter to focus on your personal homebuying budget than wait for the best mortgage rate to come around—that can end up costing you more than you’d save.