UNITED STATES—The rate at which existing houses are being sold is at its lowest point since September 2012, except for a minor decline during the Covid-19 outbreak in 2020.
Based on a monthly study conducted by the National Association of Realtors, sales of previously owned houses had a 1.5% month-over-month decrease in September compared to August.
Despite the sales downturn, inventories are still falling with home prices under pressure due to a lack of supply. At the close of September 2022, there were 1.25 million houses for sale, a 0.8% decrease from September 2021. At the current rate of sales, it equates to a 3.2-month supply.
In September, the average cost of an existing house sold was $384,800, an 8.4% increase over September 2021. Worth noting, house prices increased across the board and this marks 127 months in a row of yearly rises.
In September 2022, single-family home sales fell to an adjusted annual rate of 4.22 million, down 0.9% from 4.26 million houses in August 2022 and 23.0% from 2021. In September 2022, single-family houses cost $391,000, up 8.1% from September 2021.
Existing condominium and co-op sales were 490,000 units in September, which is a 5.8% decrease from August 2022 and a 30.0% decrease from 2021. In September 2022, the condo price was $331,700, representing a 9.8% yearly gain.
A Slow Down In The Housing Market
The real estate market is a complex one because prices are determined by many factors; local, state, national, and world-wide. Whereas basic concepts such as demand and supply may come into play, other aspects like inflation, mortgage rates, and general economic conditions may influence the prices of houses.
There could be a slowdown in the housing market because of the high mortgage rates now being offered by lending institutions.
Usually, an increase in interest rates may lead to a high cost of obtaining a mortgage to purchase a house which may create a lower demand for real estate. High-interest rates mean current mortgage customers will pay more for their monthly payments. Subsequently, new clients may be hesitant to buy houses.
The Fed Rate and 10-year Bond
The federal funds rate or the fed rate is the underlying interest rate determined by the Federal Reserve. It’s the overnight rate that banks charge other banks and serves as a reference for other types of interest rates. The fed rate influences such as the 10-year government bond and interest rates charged by other institutions such as auto, credit cards and CreditNinja.com payday online lenders. Historically the 30-year mortgage rates have moved in tandem with the 10-year treasury bond rate. If the bond-rate increases, so will the mortgage rate.
Consumers seeking to refinance their mortgages may pay more than they previously did. There has been an increase in the interest rates this year due to inflation and volatility, leading to uncertainty.
The 30-year fixed mortgage rate continued its fast ascent during the first few months of 2022, but it began to level off in June, coming close to reaching 6 percent before stabilizing into the 5s. This reprieve did not last long, as interest rates quickly resumed their ascent and surpassed 6 percent in September. This month, a few of the deals have already surpassed the 7 percent benchmark that was set.
Saving on A 30-year Mortgage
As with any other loan product, it’s prudent to shop around for a favorable 30-year mortgage because various lenders may have varying rates. Even though the difference in the interest rates may be low, it could lead to significant savings in the long term.
- Get Preapproved
The first thing is to get quotations from different mortgage lenders and compare them. It would be good to shop around on the same day for accuracy. Besides the fed rates, lenders may also base your interest rate on other factors such as debt-to-income ratio and credit score.
- Compare the APR
The Annual percentage rate(APR) is a metric that reflects the cost of the loan, including processing fees, interest rates, mortgage broker fees, and any points. Because it’s a broader measure, it’s usually higher than the interest rate. Therefore, other than the interest rate, consider a lender with a lower APR.
- Mortgage Lender’s Experience, Review, and Ratings
When taking out a long-term mortgage, you can evaluate other factors, such as the lender’s ratings, depending on their reputation. Take time to review what other customers have to say about the lending institution.
Getting the lowest quoted mortgage rate may be meaningless if your credit score is low because it may put you out of reach for a good deal. Typically, borrowers with high credit scores, a sizable down payment, and a Debt-To-Income ratio of less than 43% often get the most appealing offers.
Nonetheless, some lenders may advance mortgages to borrowers that don’t meet these conditions but could charge high-interest rates. That’s why it may be advisable to shop around. It can also be fruitful in these volatile conditions occasioned by high inflation and rising rates. With interest rates fluctuating monthly, it’s important to monitor the trends routinely before you lock in your own.
Are Fixed Rates The Way Out of The Uncertainty?
A 30-year Mortgage generally has lower installments spread over many months, unlike a 15-year mortgage. Despite this, a variable-rate loan may not be ideal under the current circumstances because interest rates may keep on changing.
On the other hand, having a stable monthly payment could help you map out your spending for the long term because the installments are less likely to change. On the flip side, a 30-year mortgage loan is pricier than a 15-year option because the interest is payable over a longer duration. Also, lenders may charge higher rates because of the risk of the loan not being quickly paid for.