From The Broker’s Desk: April 2022

I can hardly believe April is coming to an end. It seems just yesterday we were taking down our holiday decorations and grumbling about tax season being upon us again. 

The headlines lately have been filled with rising interest rates and speculation of what this will do to not just the real estate market, but the economy as a whole. I recently produced a video on this topic and thought it would translate well into my monthly blog. 

Long story short – we’ve been spoiled the last 11 years or so. I did a deep dive into the history of average mortgage rates back to the 1970s when the feds started keeping track. Here’s an illustration: 

Decade High/Low Gap
1970’s 11.2% / 7.4% 3.8%
1980’s 16.6% / 10.3% 6.3%
1990’s 10.1% / 6.9% 3.2%
2000’s 8.1% / 5.0%* 3.1%
2010’s 4.7% / 3.7% 1.0%
2020’s 3.1% / 3.0% 0.1%

What’s pictured is the respective highest average annual rate within the decade and the lowest. It shows that historically interest rates fluctuate as a natural ebb and flow of our economy. But in our most recent memory starting in 2010, because of the real estate bubble and Great Recession, the feds have kept them abnormally low and that has given us a false sense of static rates. 

This is not only unusual, it’s unsustainable. So, what we’re seeing in the market now is a correction or balancing back to what has sustained our economy for the last 50 years. This is not a reason to panic, it’s a reason to plan. Could this affect your home buying power? Possibly. Let’s take a look at what this means on the micro level as opposed to the macro. 

$100,000 Loan Principal & Interest
Jan. 2021 (2.7%) $408.00/mo
Feb. 2021 (2.8%) $411.00/mo
March 2021 (3.1%) $426.00/mo
+ 0.4% +$18.00/mo
$100,000 Loan Principal & Interest
Jan. 2022 (3.7%) $457.00/mo
Feb. 2022 (3.8%) $464.00/mo
March 2022 (4.2%) $487.00/mo
+0.5% +$30.00/mo

What we see here is a comparison of the first quarter 2021 average interest rates to that of 2020 based on a $100,000 mortgage. In 2021 there is an $18 per month difference in the fluctuation and in 2022 a $30 difference. The year over year difference is about 1% in mortgage rate which equates to $54 per month in payment. 

The moral of the story is, you need to be having a conversation with your lender on whether these differences have an impact on what you can purchase and when the best time is for you to lock your rate. The feds will meet again in early May so if you are still in the market and have not yet found your home, now is the time to be having that conversation. 

I hope this is helpful information, and if you have any further questions or would like more details please never hesitate to reach out. The real estate professionals at White Diamond Realty are always here to provide timely and pertinent information to address your specific real estate needs. 

Melissa Hornbeck
White Diamond Realty