DOVER, Del. – Chris Moore has brokered mortgages for 35 years, and he’s experienced rises and falls in rates. So when the average mortgage rate was at a decade-high level Thursday, he wasn’t about to discourage would-be buyers.
The way the Georgetown-based Mortgage Market of Delaware founder sees it, a 5.25% rate for 30 years is still doable for many.
And there’s always the opportunity to refinance the loan once rates drop, he said.
The average rate, reported by mortgage buying company Freddie Mac, stood at 3% a year ago. The cost may rise even more.
However, in the real estate market, rates and home prices inevitably ebb and flow, Moore said.
Some folks may be leery of the future right now. For instance, Moore said that, while his office was receiving 20 contacts for service a week at the same time in 2021, that number has dropped 50%. His advice: Trust in the future.
In his opinion, “This (is) one of those cycles where the rates will probably increase for another three or four years, and then, we’ll have another cycle where rates will decrease, and people will go back to refinancing.”
While today’s rate may be slightly uncomfortable, Delaware Association of Realtors president Dr. Susan Giove pointed to the past. The rate between 1971 and now peaked at 18.45% in October 1981, according to Freddie Mac. Also, from 1972-2000, annual rates averaged 9.03%.
There’s plenty going on worldwide to push mortgage rates higher. The war in Ukraine continues, supply chain issues exist, inflation is at lofty levels, the stock market has dropped significantly, and COVID-19 remains, among other challenges.
“All those types of issues scare the market, and people are going to pull their money out of mortgage-backed securities and the general stock market, period,” said Marc Pierannunzio, sales manager for Main Street Home Loans in Dover. “So when there’s a world in distress, I think people want their money in safer spots. You know, it’s the ‘cash is king’ aspect. So we’re seeing less money invested in the market.”
Even in the current market and its high mortgage rates, Moore believes there are still deals to be had. He noted that today’s rate should be considered an “acquisition cost.”
Further, he said, home seekers can still refinance a 30-year loan when rates inevitably drop.
“If you like a home, if you like the location and can afford it, then it’s still a time to buy in,” he said. “There’s going to be another refinance cycle coming, and you can gain value when it arrives.”
Finding an affordable home is the challenge, according to The Associated Press, with rising mortgage rates occurring in conjunction with sharply higher home prices.
Zach Foust, a team leader at Loft Realty in Milford, theorized that “as interest rates are going up, we’re seeing buyer demand slow right now, and that is leading to less offers on properties. The crazy asking prices are not as much (concern).”
Also, according to Moore, “You’re all the time going to have buyers. People are relocating and moving into the area all the time, especially in our area down here, especially a place like Georgetown, which is just going crazy.”
Giove can vouch for a quick selling market even in the midst of rising mortgage costs.
“The days a property is on the market are still crazy. They’re still very short,” she said. “The longest is like seven days. My broker and I were talking about this only yesterday with certain properties that we both have had … within the past 30 days. “They were made active on the market, and they were under contract within seven days.”
AP reported that utilizing five-year adjustable-rate mortgages, which will change based on the current market at the time, made up 13% of all home loans by dollar volume nationwide in March, their highest share since January 2020, according to CoreLogic.
The Federal Reserve earlier this month intensified its fight against the worst inflation in 40 years by raising its benchmark interest rate by a half-percentage point and signaling further large rate hikes to come. The Fed’s move, its most aggressive since 2000, will bring higher costs for mortgages, as well as credit cards, auto loans and other borrowing for individuals and businesses, AP reported.
Certainly, Moore has developed the mettle to ride the storm out. He said he bought his first home with a 16% mortgage in the late 1970s or early 1980s, and that fell to 12%.
“Now, people say, ‘Well, I’m not going to pay 5% for a home,” he said.
Sales of previously occupied U.S. homes slowed for the third consecutive month in April as mortgage rates surged, driving up borrowing costs for would-be buyers as home prices also soared to new highs.
The National Association of Realtors reported Thursday that existing home sales fell 2.4% last month. Sales have fallen to the slowest pace since June 2020. The median home price in April jumped 14.8% from a year ago to $391,200. That’s the highest since 1999, NAR said.
Some economists predict that home sales this year could decline as much as 10% from 2021 levels.
“Economic uncertainty is causing mortgage rate volatility,” said Freddie Mac Chief Economist Sam Khater. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly two years.”
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