Will Rising Mortgage Rates Cool The Red-Hot Housing Market?
MINNEAPOLIS (WCCO) -- When everything from gas to groceries are more expensive with record inflation, now the cost of buying a home just got more expensive in an already competitive market.
"Every house I put on the market has received multiple offers," said Coldwell Banker real estate agent Henry Edelstein.
Mortgage rates dropped historically low beginning in 2020 due to the Federal Reserve lowering rates in response to the COVID-19 pandemic.
Ashley Dito and her husband were hoping to buy to cash in on the lower rates. Homes they looked at went tens of thousands over their price range, and sellers wouldn't even consider their contingency.
"We had heard, you know, 'Things are going up, things are about to go up," so that definitely put pressure on us," Dito said.
They tabled house hunting and went with a new build in Carver, locking in their interest rate in February.
"We were just like, 'How are people doing this? How can families start?' It's crazy," Dito said.
Now with mortgage rates crossing the 5% mark, could it cool down a market that's been on fire for years?
"That's a good question," Edelstein said.
Mortgage applications fell 6% compared to the previous week, and they're down 41% from this time last year. Still, Edelstein thinks buyers are still in for a difficult spring and summer until inventory in the Twin Cities improves.