🕵️‍♂️ Why Home Buyers Face Higher Mortgage Rates 📈 Barry Hoey, Broker Owner 🍀 239RealEstateDeals.Com LLC ☘ Southwest Florida 🌴

Dated: May 11 2022

Views: 9

The Fed’s 0.5% increase in a key interest rate this week is an aggressive move to slow inflation.  But borrowing money to buy or fix up a home will cost more.

Florida Realtor Magazine 2022 05 10 Why Home buyers face Higher Interest Rates after Ukraine Russia China COVID19 coronavirus plandemic and Biden Administration Changes Barry Hoey 239RealEstateDeals.Com LLC

MENLO PARK, Calif. – The Federal Reserve yanked a short-term interest rate higher this week, making it more expensive to borrow money to buy a home or fix it up.

All in the name of slowing inflation.

The central bank raised the federal funds rate Wednesday by 0.5%, or half a percentage point. The Fed hadn’t raised the federal funds rate by half a percentage point in one meeting since 2000.

The 0.5% increase is considered a “hawkish,” or aggressively anti-inflationary, move. Prominent Fed officials had been hinting for weeks that they would deliver a larger-than-usual rate increase, and mortgage rates already had risen sharply in anticipation of it, climbing roughly three-quarters of a percentage point from mid-March to the end of April.

“The speeches that were happening in recent weeks were all about a much more hawkish stance, and that’s really where this drive in interest rates happened,” says Selma Hepp, deputy chief economist for CoreLogic, a property information and analytics provider.

The Fed’s effect on mortgage and equity rates

The Fed’s increase will cause other interest rates to rise, some directly and others indirectly.

A higher federal funds rate will directly increase rates charged on adjustable-rate home equity lines of credit. They will rise 0.5% within a billing cycle or two. These loans, also called HELOCs, are often used to pay for home renovations.

The Fed also has an indirect impact on mortgage rates, which went up steadily through March and April because the markets knew this increase was coming. Mortgage rates are likely to keep climbing, because the Fed has raised the federal funds rate just twice in this cycle and the markets expect several more increases.

Lawrence Yun, chief economist for the National Association of Realtors, noted that the rate on the 30-year mortgage has risen far more this year than the federal funds rate. “This implies that the market is already pricing in around eight to 10 rounds of [Fed] rate increases this year,” Yun said in an email. “If inflation turns higher, then the Fed will need to be even more aggressive, and this will further bump up mortgage rates.”

How expensive mortgages shrink inflation

Typically, the Fed raises the federal funds rate 0.25% at a time. But no one would call today’s economy typical. The Consumer Price Index, a gauge of inflation, hit 8.5% in March, its highest level in more than 40 years. The Fed is demonstrating its seriousness about reeling in inflation by hoisting the federal funds rate by twice the usual increment.

“We really are committed to using our tools to get 2% inflation back,” Fed Chair Jerome Powell said April 21 during a panel discussion presented by the International Monetary Fund.

You might consider raising homebuying costs an odd way to wrangle control over runaway price increases. But higher mortgage rates could slam a lid on fast-rising house prices, because many home buyers shop with a monthly payment in mind. As mortgages become more expensive, home buyers may be forced to shop for less-costly houses, which could slow the pace of home price increases and, in turn, restrain inflation.

Take the hypothetical example of someone who can afford $1,700 a month for mortgage principal and interest, and who began shopping for a house in February. Back then, the 30-year fixed-rate mortgage averaged around 4%. Let’s say our house hunter finally made a successful offer in late April, when the 30-year mortgage had risen to around 5.25%. Here’s how the rate increase affects the amount this buyer can afford to borrow:

At 4%, the buyer can afford to borrow $356,100. At 5.25%, the buyer can afford a $307,900 mortgage – a loss of $48,200 in borrowing capacity.

HELOC borrowers and home sellers aren’t spared

Higher interest rates affect more than home buyers. They change the math for HELOC borrowers and home sellers, too.

Interest rates on variable-rate HELOCs are tied to the prime rate, which moves in lockstep with the federal funds rate. Homeowners with balances on their HELOCs may see their interest costs rise as the interest rate goes up. For every $50,000 owed on a HELOC, a 0.5% interest rate increase raises the monthly interest by $20.83.

Home sellers must keep in mind that higher mortgage rates reduce affordability. It might be worthwhile to check whether buyers’ preapprovals are based on current mortgage rates instead of the lower rates of a few weeks ago.

And with fewer people able to afford homes at today’s higher mortgage rates, sellers may discover that they no longer can count on attracting multiple offers. This situation is worth taking into account when setting an asking price.

May mortgage rates forecast

Mortgage rates are more likely to rise than to fall in May, because the Federal Reserve might send signals that it will continue to raise short-term interest rates in half-a-percentage-point increments at its June and July meetings. If the central bank pursues that sort of aggressive approach to monetary policy, then mortgage rates will almost certainly rise to keep up.

If, instead, mortgage rates fell, the most likely cause would be a geopolitical crisis.

What happened in April

At the end of March, I predicted that mortgage rates would keep going up because they weren’t done rising. This forecast was equivalent to looking out the window of a plane three minutes after takeoff and predicting that the plane will keep climbing for a while. In other words, I didn’t base the prediction on deep analysis. I metaphorically looked out the window.

I guessed correctly. Mortgage rates skyrocketed. The rate on the 30-year mortgage averaged 5.09% in April, up from March’s 4.37% average.

Holden Lewis writes for NerdWallet. The article, “Why the Fed Wants Home Buyers to Face Higher Mortgage Rates,” originally appeared on NerdWallet.

Personally, i believe much of this amounts for excuses as to why Mortgage interest rates, and Inflation are both on the rise.

👉 The Hoey Team 🍀 239RealEstateDeals.Com LLC ☘ serves all of Lee County and Collier County, including the Gulf Coast Islands here in Southwest Florida where we have 7 of 10 hot market projections for 2022.  We Directly Help / Serve Sellers and We Directly Help / Serve Buyers; sometimes helping both in the same transacton.

Recently as Listing Agents, Barry & Kim with the Hoey Team; 239RealEstateDeals.Com LLC ☘ helped a number of sellers who had been in Foreberance and in similar situations; we were able to get all of them to a "very good place"; worry free & stress free; with excellent end results for them.  Also, Kim is a certified stager which helps us additionally on all of our listings.

We help people in many different situations; everybody's situation is different even in a hot sellers market; if you know someone needing help; or simply wants advice, please have them reach out to us in confidence: 239-360-5527; anytime; we continue to achieve and set record setting sales prices in the communities where we list and sell ☘

We also offer a private, custom Concierge Service, if their property needs work 🍀  For every property situation, we have a solution / solutions ☘

As people continue to move in great numbers and relocate to the general areas of Lee & Collier Counties from other parts of the United States, it is important that we are able to serve all of the area; which we do efficently, with the ability offer many different Choices and Lifestyles all of which are in abundance here in SW FLA 🌴  239RealEstateDeals.Com LLC had blanket coverage of Southwest Florida and most of Florida for that matter by being active members of four different MLS systems.

Inventory remains low overall as homes sell quickly; we do continue to list and market new South Florida property listings to the marketplace and we sell many different type homes; Resale & New Construction; Multigenerational Family Compounds, Regular Single Family Homes, Villas, Townhomes and all Condo types, from low rise, to waterfront high rise right on the beach. 

We have also seen an uptake in people planning ahead, and buying that second home now, rather than waitiang as they were planning to do; especially with Snowmads and Zoombirds.  Previously we had Snowbirds; interesting how terminology keeps changing / evolving. 

Relatively low interest rates (even with recent increases) are also a small contributing factor to the increased sales; oftentimes well over asking price.  Low inventory is still the greatest chalenge for buyers who are not prepared; but if prepared you are ahead of the game; ask how we can help with all of that.  We do see more listings coming to the market here in Southwest florida, so, that is good.

We recently got a number amazing deals for buyers; even in this Hot Sellers Market; and we are working on others; so there are deals out there; if you work with us, we will find them for you. 

For those relocating to Florida, we are pleased to be able to assist homeowners in other parts of the United States who need to sell to buy here; please reach out today for more information and how you can have a smooth, non-stressful transition / relocation.

At our Real Estate Team; Hoey Team ☘ we have been succesfully working 100% virtually / remotely for the past number of years as we continue to grow; i'm thankful that we already had systems in place to better help sellers and buyer with goal posts continually moving within our industry / profession.

Article content from FR (Florida REALTORS) Newsletter Magazine, and from other sources including Hoey Team, 239RealEstateDeals.Com LLC & Freddie Mac / Fannie Mae - Make sure to ask us for more details; Call 239-360-5527 ☘

For those Living in or Visiting Southwest Florida wanting additional resources, or a list of places to see / visit:   www.SWFL-Events.Com      Feel free to share this resource page with others  🌴

On our Hoey Team â˜˜ VIRTUAL OPEN HOUSE Page you may WATCH ? Detailed HD 3D Immersive VIDEO ? Walkthrough Tours for all our COMING to MLS & AVAILABLE LISTINGS right HERE: ? www.239VT.com  ? 

For more Real Estate related information, or if you have questions on any aspect of Buying, Selling, Upsizing, Downsizing, Moving within or Relocating to or from Florida (the number one state for people to move to), or on any aspect of the Real Estate Market, Locally, Nationally or Internationally, please let us know, we can help, we can address / answer your questions, and we are always available to help you or someone you know.

P.S. --> If You'd like for us to create a Video Tour for ANY of the Properties on our website, just CLICK "Video Request Button"; from property details https://HoeyTeam.239RealEstateDeals.Com

CLICK HERE to Visit our High Definition Virtual 3D Open House Tours Page 24/7

Click Here for our most recent Market update Report for Southwest Florida and beyond.

We do not discriminate on price, we help homeowners and renters in all price ranges; Click Here for more information on the Hoey Team ☘ and what we do to help or visit www.239RealEstateDeals.Com anytime.

Click Here for our informational Southwest Florida Website ☘

Barry is a CLHMS; Click Here to see how we help with higher end properties.

Please visit our Hoey Team ☘ Luxury Home Market Page including Luxury Home market Reports for Naples, Marco Island and for Lee County by Clicking Here

Best Places to Retire? 13 of the ‘Top 25’ Are in Fla â˜˜ Hoey Team; 239RealEstateDeals.Com LLC ðŸŒ´ Southwest Florida ðŸŒ´

Also; please check out the other blogs, and tabs to many other Links, Updates, Reports & Stats that we have here on our informational website.  

We hope that you find the information useful.  If you have any questions, please do not hesitate to contact Barry or Kim with the Hoey Team â˜˜ 239RealEstateDeals.Com LLC

Email us at Barry@SWFLLuxury.Com  or KimZuponcic@Gmail.com or Call or Text Barry ☘ at:  (239)-360-5527 

“Please Share this and our informational website with anyone who you think the info will help. 

Feel free to refer any family or friends; it is the greatest compliment that you can give to us; we really appreciate referrals from Past Customers, Friends and Fellow REALTORS, who we help in any way we can. 

Most of our business is referrals by word of mouth; from past Sellers and Buyers who we have helped; please ask for and check out our testimonials and Sales Stats.  Thanks, Barry & Kim 🍀

Blog author image

Barry & Kim, Hoey Team 🍀 239RealEstateDeals.Com LLC ☘

"Your Real Estate Concierge" If you are looking for a REALTOR® or one-stop Real Estate Team who will fully communicate; promptly, professionally, and in detail with you, to efficiently help you wit....

Latest Blog Posts

📣 Surfside Condo Collapse Settlement Nearly $1B 🕵️‍♂️ Barry Hoey, Broker Owner 🍀 239RealEstateDeals.Com LLC ☘ Southwest Florida 🌴

Pending court approval, the $997 million settlement involves developers of an adjacent building, insurance companies and other defendants.ST. PETERSBURG, Florida (AP) – A nearly $1 billion

Read More

🕵️‍♂️ Why Home Buyers Face Higher Mortgage Rates 📈 Barry Hoey, Broker Owner 🍀 239RealEstateDeals.Com LLC ☘ Southwest Florida 🌴

The Fed’s 0.5% increase in a key interest rate this week is an aggressive move to slow inflation.  But borrowing money to buy or fix up a home will cost more.MENLO PARK, Calif. –

Read More

💎 Luxury Home Sales Plateau After Pandemic Upswing 🏡 Barry Hoey, Broker Owner 🍀 239RealEstateDeals.Com LLC ☘ Southwest Florida 🌴

South Florida sales of single-family homes priced $1M and up have basically remained stagnant since 3Q 2021 – but still higher than pre-pandemic levels.FORT LAUDERDALE, Florida – After a

Read More

🔔 U.S. Economy Contracts for 1st Time Since 2020 📉 Barry Hoey, Broker Owner 🍀 239RealEstateDeals.Com LLC ☘ Southwest Florida 🌴

The nation’s GPD shrank at a seasonally adjusted annual rate of 1.4% in 1Q 2022.  But U.S. consumers and businesses – the economy’s core – remain healthy.McLEAN, Va.

Read More