By Shelley Sakala

In this month’s real estate column, local Realtor Shelley Sakala responds to the question: “I saw a report that says inflation is going down. Does that mean mortgage rates are going down, too? Is it finally time to buy?” asks Alex, a Phoenix resident.

THE EXPERT’S ANSWER
We are witnessing the relationship between inflation and interest rates. To combat inflation, the Fed has been adjusting (raising) interest rates. People borrowing money for car loans, personal loans, or home loans will pay higher interest rates than they did last year. Higher rates make homes less affordable, which has chased away many potential home buyers. Gone are the investors, flippers, and those looking to upsize or downsize. Most home sales these days are to those who must move for reasons such as a new job or a relocation. The net result is the housing market has hit the pause button as buyers await a more opportune time to jump back into the game.

But market data from early January shows signs of relief for buyers. According to Freddie Mac, mortgage rates averaged 6.33% for 30-year fixed rate loans. By the end of February, we might see those rates dip below 6%. You may be wondering whether now is the time to buy. If you keep waiting, you might see rates drop even lower. But if you wait too long, more buyers might jump back into the game, driving up home prices. The answer depends on your individual situation. If you decide to take the plunge, you might consider locking in a loan that lets you plug-in a lower interest rate if the rates happen to go down before your loan closes. Another option is to choose a loan with no prepayment penalty. This gives you the freedom to refinance your loan sometime down the road, when (fingers crossed) mortgage rates drop even more.

Whatever you decide, I recommend three steps every buyer should take prior to purchasing a home:
1) Keep an eye on the financial news. Having even a basic knowledge of what’s going on will make you a better, smarter home buyer.
2) Know your numbers – what you can afford, what you need to save – and stick to those numbers. It’s easy to get seduced by the thrill of home buying. That’s when people tend to convince themselves they can stretch past their established budget. But that extra $50 or $100 in monthly payments stays with you for up to 30 years!
3) Work with a professional mortgage broker. An experienced pro has a good feel for all your mortgage options and can find home loan products you didn’t even know about.

 

Shelley Sakala is a local realtor and owner of The Sakala Group Real Estate.