Have you tried and failed to buy a home in the past two years? Well, we understand the conundrum you are in. Many people have had a similar experience during this time. You looked for a house, set your eyes on it, visited the premises, got your finances in order, and offered a little over the asking price just to be sure, only to learn after a short while that you were in a fierce bidding war for the same house. It eventually sold for more than 60% of the original asking price. 

Even though the American real estate market has been historically hot, depending on whether you need to buy or sell a home, it’s never been this berserk for sellers since home prices hiked sharply across the board and many homes sold above their asking rate in an unprecedented time in American real estate market’s history.

With that said, there’s a big housing market shift on the horizon. Let’s explore this shift and what it means for you in detail!

The Big Housing Market Shift

 So, what is this housing market shift everyone is talking about? Well, the Federal Reserve has raised the interest rates to combat inflation throughout the country, which means that mortgage rates are soaring. The average 30-year fixed mortgage rate hit 4.67% in April. This same rate was 3.11% in December 2021. Economists and housing market experts believe that this rate will continue to climb while the home price growth will eventually slow down.

In the last two years, the number of for-sale houses dwindled. Since the supply dwindled while the demand exacerbated, it led to an unbelievable increase in the price of homes. However, now might be the time for changing home prices because the number of available homes is finally increasing throughout the country. Even in the historically slow Maine real estate market, local and private contractors are building new homes for sale to address the demand. 

With the availability of new construction and for-sale homes and the rising mortgage prices, the country expects to see the rate of rising home prices stem or slow down. Similarly, the number of new listings going into contract right away is also declining. Now, borrowing to buy a home is becoming expensive, so people are thinking twice before making a decision. 

What Does This Housing Shift Mean for You?

During the past year, a typical home sold in just 15 days, and more than 60% of the for-sale houses went off the market in two weeks. This quick selling was exhibited in buyer behavior as remote work and the low mortgage rate pushed people to buy a comfortable home for themselves at a lower mortgage rate. 

However, today, those borrowers are dealing with a high mortgage rate. If you bought your home in the past few years and took out a home loan with an adjustable-mortgage rate, you might have to pay the higher rate now. So, for instance, if you took out a $500,000 mortgage at a 3.11% rate with monthly payments of $2,138, you will now have to pay $2,584 at an increased rate of $4.67%. Not everyone can afford the increase in monthly payments. 

So, what should you do in the face of this big housing market shift? Two smart, immediate options that you can consider would be to take out a refinance or a new home loan with better terms. Let’s explore these options.

Refinance Your Home

When it comes to refinancing, you can choose multiple options. For instance, you can choose a rate and term refinance or a cash-out refinance. With a cash-out refinance, you can use the existing equity you have built for your current home to leverage a sizable mortgage from a new lender, pay off your old lender’s remaining mortgage amount, and take out the excess amount to use on renovations or elsewhere. It is a long game plan that will allow you to build your house’s equity and then eventually sell it at a higher price. 

Alternatively, you can refinance to benefit from your improved credit score and better financial condition to pay off your loan in a shorter term. The rate and term refinance will enable you to change your adjustable-mortgage rate to a conventional loan with a fixed mortgage rate. This way, you can protect yourself from the rising mortgage rate and keep paying off your loan at a fixed rate and a shorter or a longer term, depending on your specific needs. 

Take Out a New Loan

Depending on your particular needs, you might benefit from taking out a new home loan. It’s because even though mortgage rates are going up, house prices are slowly coming down. The mortgage rate will continue to rise, which means that future buying will be even more expensive. 

So, instead of waiting for a lower mortgage rate, if you have the financial freedom and the need to buy a home, you should certainly start looking before the mortgage rate goes through the roof. Immediate, smart action can save you from paying off your mortgage at a higher rate down the line. 

The Bottom Line

Whether you’re looking at Maine real estate market, Connecticut’s real estate, or anywhere else in the country, you will witness the same – rising mortgage rates and eventual stemming of the rise in home prices. If you want to benefit from the big housing market shift presently, you should refinance your home to benefit from a rising capital down the line or take out a new home loan before the mortgage rate hikes to unprecedented levels. 

If you wish to discuss your home-buying or refinancing options, get in touch with Integrity Mortgage (NMLS #1692497) today!