More expensive to buy — Local real estate brokers comment on the 14-year high in mortgage rates

For the week ending Sept. 15, came news of mortgage rates exceeding 6% — reaching their highest level since the fall of recessionary year 2008, with stubbornly high inflation the primary culprit, according to Sam Khater, chief economist for Freddie Mac, formally known as government-sponsored Federal Home Loan Mortgage Corp., which operates in the secondary mortgage market.

A year-to-year comparison is helpful.

• Last week, the 30-year fixed-rate mortgage averaged 6.02%.
• A year ago, the rate was 2.86%.

The Southeast Missourian reached out to four local real estate brokers for comment.

Impact on local housing market

Bill Cole,Edge Realty

• Bill Cole, Edge Realty

The number of homes sold in Cape Girardeau County, January through August, is down 19% from the same period in 2021. That's comparing apples with oranges, though, since a year ago, the world was still in pandemic mode with the Federal Reserve purchasing — and keeping on their balance sheet — billions in mortgage-backed securities in an effort to avoid a financial collapse. The result was historically low mortgage rates. With people not traveling, many turned attention to their own homesteads. The rapid increase we're seeing is the result of high inflation.

Lori Fowler,Area Properties

• Lori Fowler, Area Properties

We're definitely seeing an impact locally due to a combination of higher mortgage rates and related squeeze in consumer buying power. Generally, when rates rise, there is an inverse impact to home prices, which somewhat stabilizes the market for buyers. The inventory shortage, however, has kept home prices stronger. This can be beneficial to sellers but a little hard on buyers.

Liz Lockhart,Riverbend Realty

• Liz Lockhart, Riverbend Realty

Homebuyers who started looking casually during the early summer now find themselves in a different price point. For instance, buyers who go back to the lender where they got their pre-qualification letter a few weeks ago now discover a 1.5% increase in interest rates means the house payment is now out of their range. That actually happened to a buyer for one of my listings who had to back out of an already-signed contract. With inventory so low, it's often difficult to find another (affordable) property.

Tim Meredith,Century 21

• Tim Merideth, Century 21

Certainly there is an impact caused by these higher rates resulting in a loss of purchasing power for a buyer. For one example, a purchaser who could afford a $150,000 loan at 3% can now only afford a $106,000 loan at the higher rate to keep payments relatively the same. This results in a loss of $44,000 in buying power.

Outlook

• Bill Cole

I'll be optimistic and follow Freddie Mac's forecast, which is mortgage rates around 5% in 2023. However, I don't recommend sitting on the fence because if inflation isn't tamed, I'm fairly confident rates will rise, further reducing buyer power. If rates drop, there is always the option to refinance.

• Lori Fowler

It's very difficult to predict the future. Based on economic indicators, it doesn't appear interest rates are going to decline any time soon and may drift higher until inflation stabilizes. Everybody got used to an extremely low interest rate environment. Although 6% is still a decent figure, we're just not accustomed to a rate that high, but it will likely be the new normal for at least the near future.

• Liz Lockhart

The market has depended on low down payments for several years but when we get to the point that nearly all lenders require a 20% down payment, that's really going to hit the first-time homebuyer.

• Tim Merideth

I think mortgage rates will continue to rise a little but I do not think they will mimic what the Federal Reserve will likely do later this week. After a white hot two years in the housing market, days-on-market will have to increase and prices will need to moderate in order to balance the housing market. I don't see a crash that some may fear; the underlying components of the industry remain solid.

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