Learn How Interest Rates are Affecting the Housing Market

We have all been speculating of an interest rate increase and the spec is real! Interest rate jumped more than 1% in a little over a month into the new year. How will this impact the sizzling hot housing market?

Stay tuned and find out….. Oh Boy Oh boy Oh boy….. It really is happening!

The interest rate hit 4.19% as of the day of this recording on 2/15/2022. We knew it would happen but an over 1% jump this early in the year definitely caught many by surprise. The big question is…….how will this impact the housing market… To paint a better picture, we have to look at some numbers…..I know…many of you don’t like numbers but bear with me. I will make it simple…..

As of February, the median sales price between LA and Orange County sits just below $900,000. So a typical buyer will put down 20% to purchase a house worth $900,000 and carry a mortgage of $720,000.00 Back in December, when interest rate was around 3.%, that $720,000 mortgage would translate to a monthly payment of 3000 dollar. Fast forward to today with an interest rate of 4.19%, that same mortgage now requires a payment of $3500 dollars a month…… That’s a $500 dollar a month jump…..that’s a lot of money! That’s the monthly average household spending on groceries for a typical American family. Couple that with the never ending rise in home prices, they are starting to make housing unaffordable. This is one of the reasons why we saw 5 straight months of decline in pending sales or buyer demand. Many of the buyers who don’t have to buy simply decided to wait. Now, how will this impact the people that have a must and still need to make a purchase? The interest rate spike is also hurting the buying power. All of sudden, instead of being able to borrow $720,000 on a $3000 a month payment, buyers now can only borrow $615,000 on that same $3000 a month payment. Because of that now they have $100,000 less ammunition when they need to compete in bidding and directly limiting the price growth. So…. a question for you…..we are seeing a decrease in buyer demand or pending sales. We are seeing slower appreciation…..where do you think the market is trending? I don’t know about you but If these trends continue, we are seeing sign that the market is slowing down! 2022 definitely started a bit crazy. We first saw a 40% drop in available inventory now we saw a 40% increase in interest rate. It’s going to be an INTEREST-ing year! What are your thoughts? Do you agree?

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