While real estate brokerage firm Redfin reports homebuyers are in a “frenzy” to buy a house due to low interest rates, at least three people in the real estate industry say there are other motivating factors.
“Homebuyers are in a frenzy,” Redfin Deputy Chief Economist Taylor Marr said. “Buyers are reacting to changes in mortgage rates but are so far unfazed by the war in Ukraine, stock market volatility and rising oil prices. The silver lining for housing is that the spike in mortgage rates has paused for now.”
Florida mortgage broker Diego Quintero, with Tarpon Springs-based Sunshine State Home Loans, sees it differently.
“What’s putting pressure on homebuyers is the increase in rents,” he said. “In some cases, rents are going up as much as 50 percent, so for renters it’s almost cheaper to pay a monthly mortgage bill than the monthly rent.”
“Instead of it being cheaper to keep an existing renter in an apartment than find a new one, it’s more profitable to find a new tenant,” Quintero added.
Travis Rulle, chief operating officer of Orlando-based FBC Home Loans, a retail mortgage lender and wholesale mortgage broker, agrees with Redfin’s view about interest rates but says there are other reasons buyers are in a rush.
“There’s seasonality, and we’re in the buying season,” he said. “And with every eighth or quarter-point increase in interest rates, your buying pool shrinks.”
Freddie Mac reports the average 30-year fixed mortgage interest rate is 3.85% as of March 10, down from 3.92% in late February. Forbes magazine reports that 30-year-fixed mortgage rates could reach 4% this year, possibly as soon as this week, after the Federal Open Market Committee meets on Tuesday and Wednesday, when they’re expected to raise the Federal Funds rate by 25 basis points.
“It’s combination of mortgage rates and what’s going on in the world,” said Greenwich, Conn.-based real estate agent Catherine Aaron, describing homebuyers. “They want stability, and they want to feel safe in their own place.
“They also know real estate is a safe investment,” she added.
Although the median home price is up 16% year over year, reports Redfin, and as much as 34% from 2020, Quintero disagrees.
“I’d say the median price is up more like 25 percent year over year,” he said. “The appraisal is coming in at one value and the purchasing price is disconnected from it. The price can be as much as 10 to 15 percent above the appraised value.”
“Prices will keep increasing,” Aaron said. “Houses are incredibly more expensive today than they were last year. Housing prices will go up in 2023 and 2024, too.
“We’re seeing houses going on the market on Thursday and receiving offers on Saturday and Sunday. I tell my clients they need to be preapproved for a mortgage. There’s no time to call the bank,” she added.
