Are you buying a property, and you’re not sure why your mortgage is more expensive than it was when you were considering a purchase a year ago?
Or, perhaps you’re selling a home and suddenly the offers are much lower or taking longer to roll in.
What’s going on?
The real estate market is shifting in Winston-Salem and across the country. While it’s still strong and pretty competitive, inflation has driven prices higher and made mortgages less accessible to a lot of potential buyers.
Whether you’re buying, selling, or investing, work with an agency providing Winston-Salem real estate services. We can help you understand inflation and the impact it’s having on mortgage rates and the current housing market.
Where Inflation Rates and Mortgage Rates Meet
Why do mortgage rates go up when inflation increases?
Inflation has slowly increased over the last year, and the low-interest rates and frenzy of home buyers in the market contributed to that rise. We are coming out of a period where there was an extremely high demand for homes. Buyers were willing and able to make offers that were higher than the asking prices because their mortgage interest rates were so low.
Now that inflation has gone up, mortgage rates are rising as well in order to slow that demand-driven inflation.
Healthy inflation is the goal. Affordable mortgage rates help the economy. Finding the right balance is not always easy, and the market is currently in search of that balance.
Interest Rates and Mortgage Rates
The Federal Reserve cannot tell banks how much to charge in mortgage interest. However, those mortgage rates are impacted by the target interest rate that the Federal Reserve sets. Lowering that interest rate generates new money into the economy by encouraging spending and borrowing. Taking on debt is less risky for consumers, including homeowners. When that target interest rate rises, however, borrowing money becomes more expensive.
It’s uncomfortable to have mortgage rates rise after a period of generally low interest. When you think about historic figures, however, you might feel like those rates are still pretty low. For example, in the early 1980s, when inflation was hitting record highs, the average mortgage rate was between 13 and 16 percent.
We’re not quite there, yet.
Navigating the Winston-Salem Real Estate Market Now
What does this mean for you and your money as a home buyer, a home seller, or a real estate investor who is looking to acquire new properties for a growing portfolio?
- If you’re buying a home, continue looking for the right property at the right price. Sellers are likely to consider more offers now, and you can probably negotiate some help with closing costs. Make a larger down payment if you can, so you’re borrowing less. That will reduce the overall cost of your home loan.
- If you’re selling a home, prepare to consider offers that may be closer to your asking price and not higher. When you have an attractive, reasonably priced home to sell, you’re still in a strong position. It may not fly off the market in a matter of days but expect continued interest and activity.
- If you’re investing in a property, consider making a cash offer. This will make your offer stand out and protect you against losing money at high-interest rates. You’ll be happy to know that rents are quite high in Winston-Salem, and there are plenty of well-qualified tenants looking for homes.