30-year home mortgage rates are on the rise again. So are the other mortgage types. What’s in store for real estate investors this month?
Homeownership is getting more and more elusive with mortgage rates getting higher and higher. 30-year mortgage rates may have temporarily dipped a few months ago but are now once again above the 6.00% mark.
Since Q2 2022, mortgage rates have been on a wild roller coaster ride. While the Federal Reserve doubles down on its fight against inflation, mortgage rates are taking quite a hit as 30-year mortgage rates have already hit 6.00% with a quarter left for 2022. Almost every market forecast for the year predicted that we will end the year with 5.00% rates. Not one of them saw us going way past that mark and into the 6.00% territory within Q3 2022.
We anticipate that the wild ride will continue in the next several weeks as the Fed keeps its stance on battling inflation. Experts fear that the Fed’s rate-raising approach will eventually lead us into a recession which could, in turn, make mortgage rates retreat.
At the time of writing, the rates for 30-year fixed, 15-year fixed, ARMs, and jumbo mortgages have gone up. Below are the mortgage rates as of September 12, 2022, according to a report from Bankrate:
|Loan Type||Current Rate||Previous Week||Change|
|30-year fixed-rate mortgage||6.08%||6.05%||+0.03|
|15-year fixed-rate mortgage||5.40%||5.23%||+0.17|
|5/1 adjustable rate mortgage||4.53%||4.46%||+0.07|
|30-year fixed jumbo rate||6.07%||6.05%||+0.02|
|30-year fixed refinance rate||6.08%||6.03%||+0.05|
Greg McBride, Bankrate’s chief financial analyst, says:
The cumulative effect of this sharp rise in rates has cooled the housing market and caused the economy to start slowing, but hasn’t done much to lower inflation.
How the Market Has Reacted in the Last Month
As we reported last week, the rising mortgage rates, including 30-year mortgages, have been very instrumental in folks deciding to just move to rental properties at this time. Homeownership is set back to 30-year lows because of high-interest rates today.
It also doesn’t help that property prices continue to go up, as they inevitably do. While most real estate markets are cooling down, it doesn’t necessarily mean that prices are going down, too. It simply means that the rate at which home price growth has slowed down compared to how they have been going since the year started.
Prospective homebuyers today have to deal with both home affordability and inflation. On the one hand, as the economy has returned to near pre-pandemic levels, inflation has caught up at warp speed due to other global economic and geopolitical factors. These have significantly affected consumer spending, especially where investment properties are concerned.
What Have Investors Been Up to in the Past Month?
Real estate investors are divided by the current economic climate. On the one hand, they recognize the potential of buying now before housing affordability is out of reach. They figure if they make the jump now, they can save themselves from getting into higher rates for 30-year or 15-year fixed-rate mortgages. They can also take advantage of the slight plateau in home price growth.
On the other hand, not all investors have enough extra money to put into income properties, given the rate of inflation and spike in mortgage rates. Affordable housing is getting more elusive as the days go by. With appreciation and mortgage rate increases, the aspiring investor isn’t as confident in the market, while the average investor is having a harder time figuring out how to get back on track.
This is where a little due diligence can go a long way.
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What This Means for Real Estate Investors
At this point, with the way mortgage rates continue to grow, what’s an investor to do?
Bankrate’s senior economic analyst Mark Hamrick says:
All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated, and time-consuming.
He goes on to add that when we’re talking about money-saving potential, looking for the best possible deal on a mortgage has an excellent return on investment.
Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?
Given that 30-year mortgage rates are already above 6.00%, investors should set aside time to shop for options. Talk to bankers and lenders and ask them about their products. Consult with other real estate investors for any advice. Seek counsel from real estate professionals. Doing these might give you a few good leads, which will eventually bring you to a good mortgage deal.
Buy, Sell, or Wait: What Should You Do Now?
You may be asking yourself if now is a good time to buy real estate properties. Or perhaps you’re wondering if you should sell now. Or maybe you’re thinking about just waiting it out and seeing where the market will head in the next few weeks.
The answer will depend on your situation. Each investor has a different context and background to work with. There is no one-size-fits-all approach when it comes to real estate investing. The most important thing in this industry is self-honesty. You must be honest and grounded enough to answer the tough questions about your financial situation.
If you do decide to buy a rental property at this time, can you truly afford the upfront costs, closing costs, and all the other fees associated with the transaction? Can you afford to have the house fixed and upgraded to comply with state laws on rental properties? Do you have a sound marketing plan for your vacation rental business? Where will you get funding for this?
These are some of the questions you need to answer before buying real estate.
On the other hand, perhaps you already have investment properties and are seriously considering selling them at this time. Given the current market conditions, a lot of sellers are slashing their asking prices just to make a sale as folks put plans of buying a house on hold due to high prices and interest rates. Are you as motivated and desperate as they are enough to sell your property at a loss?
At the end of the day, it will boil down to your unique situation. Talk to a professional about it and give careful thought to your next few steps.
Wrapping It Up
With 30-year mortgage rates and rates on other mortgage types on an upward trend, housing affordability is getting farther from the reach of home buyers and investors. If you’re an investor thinking about selling or buying at this time, give it plenty of thought.
It would help to use a website like Mashvisor to look for promising properties that will give you the best return on your investment.
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