By Steve Yablonski
Buying a home is generally the largest purchase that most people make. Even small increases in mortgage rates can impact your purchasing power.
According to Danielle Hale, chief economist at realtor.com, buyers should “get pre-approved with where rates are today, but also consider what would happen if rates were to go up.”
They need to know what it would mean for their monthly costs. Could they manage that?
Linda Thomas-Caster, from Howard Hanna Real Estate Services based in Fulton, agrees.
“It is fluctuating; it’s getting right up there. When it hit into the fours, people took a jolt. It’s like 5.1% right now—it’s changing. But I think it’s going to level back down. But not back down to the 2.75. It’s just not going to happen, I think. That was probably way too low for our economy as well,” she said.
Purchasing power is the amount of home you can afford to buy that’s within your financial reach. Mortgage rates directly impact that, Thomas-Caster noted.
When rates rise, so does the monthly payment you’re able to lock in on your home loan.
People still need houses and there still aren‘t that many out there.
“Nobody knows what the future will bring,” Thomas-Caster said. “I don’t anticipate there being ‘huge jumps’ in the rate in the next whatever. We’re not going to be at 10% or 12% or anything like that.”
She thinks that mortgage rates may even go up a little bit more, but not substantially.
“I think it will level back down. I think the banks will play with it, too. They’ll undercut each other for a short time and then, you know, they’ll get in the game at the same place and level out. That’s competition, too,” she added.
There typically is a little spike in mortgage rates around this time of year as more people actively look to buy or sell.
“So it’s not unexpected. But I think it’s shocking because for so long people could rely on such a steady ‘it’s only this, it’s only that,’” she said. “Anybody who bought probably doesn’t want to sell now because their mortgage rate will change. A lot of people are staying put because they have such a good interest rate, such a good mortgage rate. Those fixed rates; they may never be able to get again.”
The market is still ‘healthy.’
“I think it has just been a correction. Central New York has always had a sluggish appreciation market and I just think we’re seeing a correction of our market,” Thomas-Caster said. “Places that we have sold, any place else would have sold for about that amount anyway.”
She doesn’t think things will go down.
“They’ll probably stay at the levels that they are at, just my opinion. For the most part, people are leveling out and not over-paying, over-buying. It’s an exciting time for sellers and for buyers. I would say it is still a sellers’ market,” she said.
Buyers have a certain amount of caution now because they’ve seen this and some have just completely dropped out of the market.
“Some are so discouraged because it’s so difficult for them. There are a lot of investors paying cash for properties. It’s kind of undercutting the homeownership, first time buyer kind of thing because they are looking for investments and are investing in the housing market. The people who want their first home or a home are being out-bid by conglomerates and investors with money,” she said.
The other issue
“I haven’t seen too much negativity [from the rising rates] so far. The interest rate is up a couple percentage points, a little above 5% right now,” said Russell Partrick from Land and Trust Realty in Mexico. “That hasn’t been a huge problem, hasn’t pushed anybody out of the market that I’ve been working with. The bigger issue that has been going on for two or three years is the inventory—the low inventory. There is very little out there for people to buy and when something comes on the market, it gets snapped up. That is what we are struggling with. Sometimes, something is listed and there are multiple offers very quickly.”
“I feel very bad for anyone who was looking to buy a house when the interest rates were so low, 3% or less. Anyone trying to buy a house the past two or three years, it’s been very frustrating for many of them because of the low inventory,” he added.
He said he hasn’t seen an impact from investors buying up properties in Oswego County. “But, yes, it is all over the place,” he noted.
The other big investment thing that is going on is mobile home parks.
“Big companies are buying those things up. If you own a mobile home park you don’t own the house, so you don’t have to keep that up. You just take care of the grounds and collect the rent. Seems like a good business model,” he laughed.
“We’re busy as we can be. That’s the thing, when there’s a low inventory, few houses to show, somebody finds out about a house two days after it’s listed, but it’s gone already,” he said. “I’m a small business here. We are totally negatively affected by low inventory. But we do quite a lot of property management. That helps, helps during these times.”
Land and Trust Realty manages sites in Mexico and Parish as well as in Sandy Creek.
“I can’t forecast a rate hike. I imagine they are going to go up. It’s a tough call. Hopefully not, but we’ll see. In a rising-rate environment—like we’re in today—it limits your purchasing power,” Partrick noted.
“When I first got into real estate, around 25 years ago, it seemed like the rates were all around 7% or 8% and we were selling houses then,” he said. “Some times if you’re on the edge of affording a house, maybe you can’t buy as much of a house as you wanted to, but you can still buy something.”