NORFOLK, Va. - Mortgage rates are the highest they have been in years as the Federal Reserve tries to cool the economy and curb high inflation.
Recently, Freddie Mac, a public finance company, released the results of its Primary Mortgage Market Survey, showing that the 30-year fixed-rate mortgage (FRM) averaged 6.02%.
Steven Hargrow, the owner, and principal broker of SLH Real Estate said that buyers are now settling for smaller homes, despite the same monthly payment, and sellers are waiting longer for their property to leave the market.
"Let's say, the house was $550,000 and the rate was 2.5%, your mortgage was maybe $2,500. Now for $2,500, you're looking at a house that's around $300,000," Hargrow said. "With the recent rise in interest rates, [we] have noticed that the [number] of buyers looking to purchase has declined."
Economists like Bob McNab with Old Dominion University said it's because people's money just isn't going as far.
"Buyers are becoming [choosier] and, also, they can't afford the same house that they could have afforded 24 months ago," he said.
News 3 Problem Solver Erin Miller asked McNab to provide an example.
He said at a fixed rate of around 3%, which we saw a few months ago, you'd pay about $1,300 for principal and interest. Now with rates between 6% and 7%, you'll likely pay around $1,900. At the end of the day, buyers will end up paying $600 or more each month.
"They not only have to put money aside for principal and interest, taxes and insurance, but they have to have an emergency fund for when the air conditioner breaks, or the water heater breaks," McNab said.
McNab predicts rates could rise to 7% by the end of the year, before easing off in 2023 and 2024.
Even still, Hargrow said, "It's all about the customers to this point, yes, rates are higher, but homes are still there."
If you are shopping around, economists suggest getting pre-qualified as a way to get a lower rate. Refinancing is also an option for people who want to buy now and adjust payments later.
