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Several Federal Reserve interest rate hikes in 2022 have pushed home mortgage rates to their highest levels in the past decade, according to data from FreddieMac. And while that might sound scary, it's actually great news for buyers! These recent market adjustments have created one of the best home buying environments to come around in a long time. Consider it the current economy's best-kept secret.
Here are six reasons home rates are better than you think and why higher rates might be the key for buyers to get the home they want.
Housing price stabilization
Redfin reports Utah housing prices increased 10.3% from this time last year. Now, with higher interest rates, housing prices will likely stabilize a bit due to lower competition.
Ralph McLaughlin, chief economist at Kukun, a real estate and data analytics company said in an interview with Money.com, "Rising rates may help tamper down demand somewhat to the point that it would help the housing market look more normal … Because we are certainly in an extremely abnormal market."
So while interest rates are higher, Dejan Eskic, writing for the Kem C. Gardner Policy Institute, explains that it's a good time to buy because prices are still expected to increase.
Reduced competition
With higher rates, there will naturally be less competition for buyers. Last year, buyers were in a frenzy, with home listings receiving dozens of offers — many for significantly more than the asking price. This was an exciting time for sellers, but a desperate time for buyers. Now buyers can look ahead with less pressure as those multiple-offer days are slowly moving to the rearview mirror.
Katie McKellar, writing for the Deseret News in July 2022, said, "Last month, bidding wars became less common and homebuyer competition has now dropped to its lowest level since 2020 before COVID-19 sent the national market into upheaval."
With less competition comes more opportunities for negotiation.
Rates are still historically low
While it's been a while since rates in the 4% and 5% range have been a thing, those rates are still historically low.
Ruben Caginalp at Bankrate compiled data that showed that for much of the past 50 years, interest rates have been well above 5%, with only the last 10-15 years having rates lower than 5% on average. So, while the days of 2% loans might be gone (for now), a loan in the 5% range is still an excellent rate historically — especially when compared to the rates before the 1990s.
Build equity now, refinance later
The maxim of "right now is always the best time to buy real estate" is true. While interest rates are higher than they've been in some time, there is always the chance that they might go down and you can refinance. Housing prices? You might not get so lucky. Locking in a rate now will secure you on a property that would only cost more later.
David McMillin writing for Bankrate explained, "If you buy now, you can start building equity immediately. That's true no matter which way the real estate market is leaning at the time. A key point for today's market, though, is that buying now means avoiding additional mortgage-rate increases later."
These truths, coupled with the possibility of a refinance later, mean building or buying now is a no-brainer.
Building equity no matter the rate
Homes are one of the few things you can buy that will start building equity immediately. Even if housing prices fluctuate over the next few years, the home you buy will likely continue to increase in value.
The only time this hasn't happened was the housing bubble of 2008. So, while it might be tempting to see if prices will cool off significantly, David McMillin of Bankrate suggests jumping on your dream home and starting building equity now, as long as your financial circumstances allow.
Lenders are offering incentives
For the first time in a long time, lenders and homebuilders are offering incentives to buyers. Ivory Homes, in partnership with Momentum Loans, are offering very competitive incentives including a preferred lender incentive up to or equal 3% of the buyer's loan amount that may be used for a permanent rate buydown, temporary buydown, or mortgage insurance buyout, or purchasing a home that will be completed in the next 60 days.
These attractive incentives from Ivory Homes only sweeten the deal of getting a top-notch new home built just for you. Visit the Ivory Homes website today to find out more information on their buyer incentives and all the homes and sites available right now.
