High mortgage interest rates are contributing to a cool housing market

Published: Jul. 3, 2022 at 4:25 PM CDT
Email This Link
Share on Pinterest
Share on LinkedIn

SIOUX CITY (KTIV) - This past week, we saw interest rates on both 15 and 30 year fixed mortgages go down after spiking in the last 60 days. However, they remain well over 5%, which is more than double what they were during this time two years ago.

In the wake of the pandemic in 2020, the housing market saw some of the lowest interest rates in history, prompting many Americans to buy, or sell, their homes.

In the past 60 days, the interest rates have nearly doubled back up between 5 and 6 percent.

“What that’s done is that that has started to cool off buyers who are going into the marketplace because now they’re paying more in their monthly payment than they had to a year, year and a half ago when interest rates were in the 2s and 3s,” said Jason Geary, a realtor with Century 21 ProLink.

“And so they have to pay more for the same house on a monthly payment,” Geary continued.

The main force behind this change has been the government’s push to slow inflation.

“The interest rates are going up because ultimately, the Federal Reserve is starting to pull back monetarily,” said Geary. “They’re raising interest rates and pulling back some of the activities they’ve been doing to stimulate the economy to get the market to start cooling back down. So really, what the federal reserve is doing to curb inflation is starting to impact homeowners and homebuyers in this market.”

The market has changed drastically as a result, making buying or selling a home much more difficult than it was just months ago.

“What we’re starting to see now is we’re starting to see homes that used to sell at record time now not selling as quickly, and we’re starting to see sellers who need to make a move because of usually, life change, they have to do price reductions, or they’re waiting longer for a buyer to show up than somebody who may have sold their house just a few months ago,” said Geary.

Despite this, the rates we’re seeing right now are actually low compared to the historical average. Geary says the rapid change has been the real driving force behind the market cool down.

“The interest rates we’re seeing right now historically are actually still very low compared to when you look over a 20-30 year timeline,” said Geary. “They’re just not low compared to what they were a year or two ago.”

Realtors hope that once the rates stabilize that the market will pick back up.

According to Geary, it ultimately is up to the Federal Reserve to decide where and when to set these rates. Geary anticipates that it could be a few more months before that ends up happening.

While these high interest rates may be deterring homeowners looking to move up, Geary says it has not been as much of an issue for first time homebuyers. He says this is because of the long term value of jumping into the market and owning property.

Copyright 2022 KTIV. All rights reserved.