Rapidly rising mortgage rates will shift the real estate market here in the Alexandria area, according to local real estate agents and home lending professionals.
Right now, mortgage rates are they highest they’ve been since 2011, said Christian Hartung, senior vice president of mortgage lending at Rate.com in Alexandria.
Less than a year ago, well-qualified people could get mortgages as low as about 3%. “They are expected it hit 6% range in the next one to three months,” Hartung said.
That increase in mortgage rates can significantly affects a person’s housing budget. With a loan of $400,000, for example, a 3.125% fixed-rate 30-year loan would cost $1,714 per month. This month, the same loan at 5.125% will cost $2,178 per month — a difference of more than $450.
“It is having some impact on affordability with those buyers that are trying to max out their buying power,” Hartung said. “With others, it’s very doable and still a great time to buy.”
“These are somewhat extreme circumstances which will require both buyers and sellers to make certain concessions,” said McEnearney Realtor Janet Caterson Price.
For home owners considering selling their home this spring or summer, there’s good news: It’s still a seller’s market here in Alexandria. Home inventory remains low, meaning there are few homes on the market for buyers to choose from. Many homes are still receiving multiple offers from interested buyers.
“With location, condition, price and market conditions being the primary influencers for home sales, sellers should keep in mind that a high percentage of buyers are still looking for a move-in ready property,” said McEnearney Realtor Lisa Groover
For buyers, it’s a bit more complicated — and consulting early in the process with their lender is critical.
Buyers who have a hefty down payment saved up or who are selling their current home at a significant profit can navigate the process more easily.
“One potential strategy would be to buy down the interest rate,” Price said. “Always avoid PMI (Private Mortgage Insurance) by putting down a larger down payment, or consider 15-year terms for a lower interest rate.”
For buyers who are putting down a smaller down payment on a home, consider looking at an adjustable rate mortgage instead of a fixed-rate mortgage.
“If buyers were pre-approved for a loan based upon a lower interest rate, they should reach back out to their lender for an updated review of their financial situation. Depending upon their debt to income ratio, they may need to modify the price range for their home search,” Groover said.
Buyers who are not priced out of the market due to higher interest rates will want to keep an eye on mortgage rates over the next year.
“Once inflation is under control, rates will come back down and present an excellent time to refinance,” Hartung said.
