Seize the day.
That’s a message you should be delivering to clients who have been chomping at the bit to buy a home but have been forced to hold off because of soaring interest rates, unprecedented home prices, and high inflation.
And why is this the right time for such a pep talk? Because mortgage rates have finally eased – even if only temporarily – enough for them to get into the market and scoop up a home before uncertainty and volatility take center stage again in the coming weeks.
Mortgage rates dip for two straight weeks
Fears over a potential recession have caused mortgage rates to fall for two weeks, giving buyers another chance to save during the summer homebuying season.
Soaring mortgage rates over the past year have significantly slowed demand for mortgages. That has forced lenders to look for ways to become more competitive and appeal to potential home buyers.
Right now, the tactic has been offering slightly lower mortgage rates to attract people to either buy a new home or refinance their existing mortgage.
The 30-year, fixed-rate mortgage averaged 5.3% for the week ending July 7, down from 5.7% the previous week, according to Freddie Mac. This decline rate was the most significant decrease since 2008 and a reversal of recent trends, which have seen rates soaring rapidly – even above 6% – since the heart of the pandemic.
Even though the current rate reprieve is good news for your buyers, mortgage rates remain well above the historically low rates that defined the period following the global financial crash of 2008 and 2009. But, hey, good news is good news, right?
Especially for your clients who have felt a financial pinch from all sides – groceries, entertainment and vacation costs, retail purchases, and more. All these added costs have probably had them second-guessing whether now is the right time to buy a home. It’s your job to explain why now is the best time.
As we enter the peak of the homebuying season, the current mortgage rate dip couldn’t have come at a better time. Your clients may still be able to make their move with time to spare before the new school year begins, which is often a consideration when choosing to relocate.
According to a recent Realtor.com report, home inventory jumped 29% for the week ending on June 30 compared to a year ago. As a result, some sellers are lowering prices slightly due to less competition – something that hasn’t happened in years. Less competition means better chances for your clients to have their offers accepted.
Rate reprieve likely short-lived
There’s no telling how long the current leveling off of mortgage rates is going to last. But according to most experts, it won’t be long. That’s not a threat; it’s an almost certainty.
That’s because the Federal Reserve is expected to execute several more benchmark interest rate hikes in the coming months and into 2023. Since mortgage rates are typically directly influenced by changes in the Fed rate, that means they will rise, too.
The central bank (Fed) is slated to announce its next rate decision on July 27. Industry experts are projecting another three-quarter-point interest rate increase, even as the economy shows signs of slowing and recession fears mount.
In June, the Fed raised its benchmark rates three-quarters of a percentage point – its most aggressive hike since 1994. That action helped push mortgage rates above 6%. A similar bump in mortgage financing costs can be expected due to the impending Fed move.
How are sellers affected?
Certainly, your clients looking to buy may be the biggest beneficiaries of the current dip in mortgage rates. But there’s still plenty of good news for your sellers, too.
Although some bidding wars have calmed down, it’s still a great time to sell a home. Property values are still at historic highs, so your clients will yield healthy profits when their home sells. And because the mortgage rates have dipped, your sellers should have more potential buyers making offers.
The downtick in mortgage rates is a nice surprise for your clients, but not one that will stick around for long. So, now is the time for you to make sure they know the current state of the market and that if they’re on the fence about buying (or selling) a home, acting now may be in their best interest.
Campisi, N. (2022, July 7). Mortgage rates drop as housing market begins to cool. Forbes. Retrieved July 15, 2022, from https://www.forbes.com/advisor/mortgages/mortgage-rates-drop-july-7/
Ostrowski, J. (n.d.). Mortgage rates resume rise toward 6 percent. Bankrate. Retrieved July 15, 2022, from https://www.bankrate.com/mortgages/analysis/
Orton, K. (2022, June 30). Mortgage rates held in check as recession fears Mount. The Washington Post. Retrieved July 15, 2022, from https://www.washingtonpost.com/business/2022/06/30/mortgage-rates-held-check-recession-fears-mount/
Smialek, J. (2022, July 6). Fed moves toward another big rate increase as inflation lingers. The New York Times. Retrieved July 15, 2022, from https://www.nytimes.com/2022/07/06/business/economy/fed-rate-increase-inflation.html
Google. (n.d.). Google search. Retrieved July 15, 2022, from https://www.google.com/search?q=mortgage%2Bpayment%2Bcalculator&oq=mortgage%2Bpayment%2Bcalculator&aqs=chrome..69i57j0i512l6j69i60.63734j0j4&sourceid=chrome&ie=UTF-8#cobssid=s&wptab=s:H4sIAAAAAAAAAONgVuLSz9U3MDI3LjEtf8Royi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uJC08exiEvLNLypJT0xPdU7MSS7NSSzJL1rEKp0LFVQoSKzMTc0rUUiGywIAvvPDUHkAAAA