Borrowing rates continue their wild roller coaster ride. We see mortgage rates November 2022 hit the 7.00% mark in the first week of the month.
In the week ended November 7, mortgage rates rose for all loan terms compared to the previous week. According to data gathered by Bankrate, mortgage rates for 30-year fixed-rate mortgages, 15-year fixed-rate mortgages, 5/1 adjustable-rate mortgages, and jumbo loans contained their upward trend in November. The higher rates come as the Federal Reserve continues its battle against inflation.
Greg McBride, the chief financial analyst for Bankrate, remarked:
“The speed with which mortgage rates have increased in recent months has been whiplash-inducing and the cumulative effect — from near 3 percent at the beginning of the year to near 7 percent now — would’ve seemed laughably unlikely at the beginning of the year.”
McBride also went on to say that inflation running at 40-year highs is expected to do just that to the economy.
With the Fed once again raising its rates in its November meeting, there are different interpretations about what’s to come.
Some say that mortgage rates beyond November 2022 will continue to rise and perhaps reach the 8.00% mark. Others say that rates should stabilize because subsequent hikes have already been accounted for. Still, others say that there is a chance that the Fed will pull back before the year ends.
The current mortgage rates going into November 2022 – including the difference from last month’s mortgage rates – are as follows:
- 30-Year Fixed-Rate Mortgage: 7.29% (+0.15)
- 15-Year Fixed-Rate Mortgage: 6.48% (+0.09)
- 5/1 ARM: 5.59% (+0.07)
- Jumbo Loans: 7.28% (+0.16)
- 30-Year Fixed-Refinance Rate: 7.30% (+0.16)
Related: Median US Home Prices Up 46% Since Start of Pandemic
How the Market Has Reacted in the Last Month
Last month’s mortgage rates forced real estate investors to tread more carefully into buying income properties at this time. Because of how mortgage rates are behaving, many potential investors are putting their plans on hold until some stability kicks in.
The only thing about that is nobody knows what the US housing market will look like in the next few months. It is possible that mortgage rates, home prices, and rental rates will continue to increase. Or, one or all of them will stabilize in the next year. Experts and analysts agree that a housing market crash isn’t happening any time soon, so that’s a relief.
Will the Housing Market Continue to Decelerate?
However, that’s not to take away from the fact that the housing market has decelerated, given the higher mortgage rates we’ve seen as of late. We started the year with interest rates at only 3.00%, with forecasts of hitting 5.00% by the end of the year. However, within Q2 2022, we already broke through that mark and went beyond 6.00% as we entered Q3 2022.
Q3 home sales were initially projected to be seven million units but only hit 5.4 million units at the end of the quarter. Mortgage applications also showed the same trajectory as they fell due to a contraction in home sales.
FreddieMac forecasts home sales will bottom at around five million units next year. That’s already a massive 30% drop from the Q3 2022 forecast.
As home sales drop, the overall market will see an increase in housing supply over the next few months.
Related: High Mortgage Rates Pushing Consumers to Rent Homes Instead of Buy
What This Means for Real Estate Investors
While the continuing increase in mortgage rates is no longer a surprise, it is still something that real estate investors should seriously factor into their investment decisions. People into real estate investing should take this news seriously, especially those who cannot and did not buy investment properties in all-cash transactions.
Bankrate’s senior economic analyst Mark Hamrick has this to say:
“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.”
According to Hamrick, seeking the best deals on mortgage rates offers great potential to make an excellent return on investment for real estate investors. He adds:
“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?”
If you’re a rental property owner and believe you’re already safe from the high mortgage rates, think again. If you’re considering refinancing, the bad news is that current refinance rates for 30-year mortgages are now up 0.16 points at 7.30%.
Real Estate Investing at This Time: Is It a Wise Thing to Do?
If you opt to invest in real estate properties today when mortgage rates are high, you will need to consider all possible options available to you.
First, take a look at the market you’re considering. Do extensive research about it to see what the actual market conditions are like. If you’re interested in investing in rental properties, look for rental comps and see the current monthly rental income, the cap rate, cash on cash return, and occupancy rate for rental properties.
You need access to such types of data so you can make more accurate and realistic projections of your return on investment.
Next, if you’re taking out a loan, make sure to shop around first. Don’t just settle for the first thing you think you can afford. At this point, every penny saved on mortgage payments is a penny earned. Do your due diligence before making any final decisions.
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When investing in rental properties, make sure to look at the key metrics, such as rental income, cap rate, cash on cash return, and occupancy rate.
Wrapping It Up
As we near the end of the year, mortgage rates November 2022 will probably continue to go up because of inflation. Investors should proceed with greater caution before making a final investment decision.
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