Interest rate hike could cool hot housing market
MINNEAPOLIS – Experts say the bump in interest rates is slowly cooling the red hot housing market we've seen this summer, but it can still be a good time to buy.
The central bank increased interest rates by 0.75 percentage point Wednesday, sending mortgage rates above 6% for the first time since 2008. While the rate hike is shocking to some, it's still no where near the 18% rates seen in the 1980s.
This marks the fifth time the federal government has raised rates and experts said each bump has helped to slow the hot housing market.
Some houses over the summer were only staying on the market for a week, if not days, at most but now they're staying on average close to a couple of months.
While it's not completely solving the inventory issue, it is helping, and it means buyers have more homes to look at and more time to look at them.
"You want to have negotiation between the buyer and seller," said Realtor Emily Green. "You want to give the buyer the time to inspect the property and to make sure that they're making the right decision. It's very stressful to have to see a house come on the market at noon and try to make an offer without an inspection or whatever other things you have to do to sweeten the pot."
Over the summer, the housing market was often referred to as a sellers' market.
Green said the bump doesn't necessarily mean that it's now a buyers' market, but it's moving closer to becoming a balanced market between both. She adds a true balance is when homes will stay on the market for an average of six months.
After months of searching, homeowner Kristelle Mendoza just moved into her new house in north Minneapolis last weekend. She said it was all about being flexible and thinking creatively to find the home of her dreams.
She started searching in June when the market was still red hot. She said she looked at more than two dozen houses, but couldn't find exactly what she wanted, the homes were selling soon after they hit the market and she was competing with offers that were thousands of dollars over asking.
She said things slowed down a bit by August, it was still competitive, but her patience finally paid off when she found a home that was in budget in a neighborhood she liked, and while she said it wasn't perfect, it had the potential to be.
"So it was good that we had a full floor that was exactly what we needed," she said. "All the bedroom space, all the bathrooms, the kitchen perfectly done. We didn't have to touch a thing on this floor. So that was my feeling as long as I can have a good space while we work on what needed to be done in, which we're almost done, in about a week we'll get the basement completely finished."
For perspective, Green suggests homebuyers still looking to save money make sure they come up with a budget for what they can really afford. Refinancing can be an option at a later date if interest rates drop significantly. Lastly, try to make extra principal payments. Green said by making one extra payment a year, homeowners can shave off 10 years of their mortgage.
