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What Do Interest Rate Hikes in 2022 Mean for You?
Dated: February 16 2022
Views: 2872
What Do Interest Rate Hikes in 2022 Mean for You?
The fear of rising interest rates has been in the news recently—and it's not unfounded. Interest rates have been rising recently, and will continue to do so throughout 2022, but Flotilla is here to help you figure out what it all means, and put it in perspective for you!
Interest rates affect what buyers can afford to pay when purchasing a home. As a very basic example, a buyer who can afford a $225,000 home at a 3% interest rate can only afford a $207,000 home if rates increase to 4%—an $18,000 decrease in the price of a home they can afford.
Putting Rates into Perspective
It's important to understand where interest rates have been in the past vs. where they are today to understand our current and future situations.
As of February 2022, the average 30-year rate is about 3.55%. Historically, this is an incredibly low interest rate. For the past 20 years, rates have been declining from about 8% in the year 2000, 6% during the 2008 housing crisis, and as low as 2.7% during the pandemic in 2020. If you want to know what true interest rate insanity looks like, travel back to 1981 when rates went as high as 18%! The monthly payment on that $225,000 Oklahoma City home in 1981 would have been $3,400 compared to $1,000 at today's rates! When it comes to the past few years of rates, we have been living in very fortunate times.
Analyst Predictions
So where are interest rates going in 2022? They will be going up, but luckily, analysts aren't predicting anything too disruptive.
The Mortgage Bankers Association (MBA) has the highest prediction at 4% by the end of the year. The average from Freddie Mac, Fannie Mae, MBA, and the National Association of REALTORS® (NAR) puts their year-end prediction at 3.7%.
Even a rise into the 4% range still matches rates seen only a couple of years ago in 2017 and 2018 when affordability for buyers was still fantastic.
What Does This Mean for Buyers?
“Housing data has indicated that rising mortgage rates are creating a sense of urgency, rather than deterring potential homebuyers, and prices continue to rise while the few homes available for sale are snapped up quickly.”
—Danielle Hale , REALTOR.com Chief Economist
As rates increase through the year, what buyers can afford to pay for a home will decrease somewhat, but not drastically. Couple this with home prices that aren't expected to decrease from their massive appreciation in values over the past two years, and buyers will continue to be battered by a housing market squarely advantaged toward sellers.
If you're serious about buying in 2022, speak with your Flotilla REALTOR® and their lender sooner rather than later. By getting pre-approved ASAP, you can lock in today's lower interest rates for 60 to 90 days while you search for a home.
As we're exiting Winter, more homes will come onto the market during the Spring and Summer months when sellers tend to prefer listing their homes. More listings in the upcoming months advantages buyers with more inventory to choose from and perhaps more competitive pricing from sellers.
Expect multiple offer situations to continue, however. Buyers are still desperate for homes, so it will be important to consult your Flotilla agent to make a strong initial offer to secure a winning bid.
What Does This Mean for Sellers?
Sellers will continue to enjoy a market in their favor. The increase in home values may begin to taper off, and likely not decrease much or at all from their gains.
Sellers can still take advantage of lower interest rates & decreased supply of listing inventory during the remaining Winter months before more rate increases arrive and more listings come on the market in the Spring and Summer to compete with. If you've been waiting to get the highest price for your home before selling, this year will likely be that time.
© 2022 Flotilla Holdings, Inc.
Jennifer Cody
Jennifer Cody (Arsenault) is a lifelong Oklahoman and seasoned real estate professional who has been serving her community since 1998. As the founder and Broker Associate at Flotilla Real Estate Partn....
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