The sharp upward movement in rates in a short period is eye-catching, but mortgage professionals say there’s no reason to panic as market conditions remain relatively healthy and affordable.
‘Natural, balanced market’
Gino Fronti, the West Division president for Ohio-based digital mortgage lender Lower, told HousingWire in an email interview that inflation concerns tied to rising oil prices have resulted in a “modest bump in rates recently.” But he said that oil-driven inflation takes three to six months to become “systemic” across the economy, so further rate increases will hinge on the duration of the conflict.
For prospective homebuyers, he said, ample opportunity remains to jump into the market.
“For purchase borrowers, the immediate impact is relatively limited. That rate movement translates to roughly $60 to $150 more per month, depending on the market,” he said. “In most cases, that alone isn’t what should determine whether someone buys a home, but it does introduce hesitation, which is what we’re seeing in conversations right now.”
Fronti also explained that rates remain roughly 50 bps lower than they were a year ago. This improved affordability metric is bolstered by what he calls the “first naturally, fully organic market we’ve seen in over two decades.” The inventory of existing homes for sale, which stood at 3.8 months of supply at the current sales pace as of February, is approaching what he considers a balanced market of four to six months.
“If you ask me, this is a wonderful time to buy. And with the right education, it’s also a good time to sell for those looking to move, especially as the gap between previously locked-in low rates and today’s rates is not as wide as it was a year ago,” Fronti added. “This is a natural, balanced market — and for both buyers and sellers, it’s a real opportunity to make moves in real estate.”
Condominiums are an area of opportunity for consumers and housing professionals alike, spurred by recent changes from Fannie Mae and Freddie Mac to create lower insurance costs.
“Overall, these changes should loosen condo lending to a degree, but they won’t solve all of the underlying issues,” Fronti remarked. “As a result, non-QM solutions that provide options for non-warrantable condos will likely continue to see growth in this segment. These changes may also help stymie some of the losses in appreciation, or even depreciation, that we’ve seen in certain markets with more significant condo-related challenges.
End of the refi wave
Brian Holland, founder and CEO of Virginia-based Atlantic Bay Mortgage Group, also noted the positive impacts of increased inventory, which has reduced the need for buyers to enter bidding wars.
“Many buyers are now willing to accept rates in the 6% range to seize the opportunity for a move-up purchase,” Holland told HousingWire via email. “Our discussions with borrowers focus on their specific needs, emphasizing that those who have waited for lower rates may have missed out on substantial gains in home equity.”
Rising rates have been more impactful on the refinance market, Holland said. More rate-and-term and cash-out borrowers emerged when rates briefly dipped below 6%, but demand has since cooled.
“The demand for refinancing significantly boosts economic activity, facilitating home rehabilitation and improvement, as well as allowing homeowners to allocate savings toward other priorities,” Holland said. “Lower rates are crucial not only for stimulating housing demand and enhancing affordability but also for fostering lasting increases in consumer spending and economic activity. When homeowners benefit from lower rates, the resulting financial relief is injected directly into the economy rather than being absorbed by bondholders or wealthier segments.”
Karl Benjamin, executive vice president of third-party origination at Cardinal Financial, also indicated that mortgage professionals should turn their attention to the traditionally busy spring purchase market as refi business wanes. He pointed to recent Redfin data that shows mild U.S. home-price appreciation of about 1% and a glut of sellers relative to the number of buyers.
“This year’s spring market is unfolding under a different set of conditions than we’ve seen in recent years,” Benjamin said. “While mortgage rates remain uncertain, we’re seeing more listings come online and sellers becoming more open to negotiations. For buyers who have been waiting on the sidelines, that combination can create meaningful opportunities.
“Mortgage rates tend to dominate the conversation, but they’re only one part of the homebuying decision. Buyers should also be paying attention to inventory levels, how long homes are staying on the market and whether sellers are offering concessions or price adjustments. Another important element is a buyer’s own financial picture — including credit profile, savings, and long-term plans.”