Home buyers face sticker shock in 2023

Sean Tongson

Potential home buyers faced a financial shock this year while shopping for a mortgage.

Interest rates for a 30-year fixed mortgage rate currently stand at 7.02 percent whereas a 15-year fixed rate stands at 6.28 percent. This marks a contrast to the beginning of last year, where interest rates for a 30-year fixed rate was at 3.55 percent. Interest rates have risen and have contributed to the cooling housing market. But why do interest rates go up in the first place?

“If you look at why interest rates are rising it is because of inflation,” said Senior Financial Advisor David Roche, of Apex Securities and Asset Management in Brentwood. “It’s very difficult. And some homeowners have a hard time accepting that their homes aren’t worth as much as they were a year or two ago.”

Roche is referencing the current housing market. Considered to be strong and booming two years ago and even last year, a shortage of housing inventory and inflation has contributed to the rising of mortgage rates, with an uncertain future.

“There are fewer buyers who can qualify for mortgages at the higher rates,” said Roche. “With rates going down, the

See what others say about

value was going up. It’s a challenge. You’ve got other folks who are trying to get in. You have to come up with a bigger down payment, and I don’t know if people are sitting on all that extra cash. They know what they can afford.”

Statistics go into further detail explaining the correlation between ongoing infla- tion and rising interest rates. Mortgage rates in 2020 dropped to historic lows as a result of the COVID-19 pandemic as the Federal Reserve cut the federal funds rate to nearly 0 percent to help stabilize the economy in the wake of the pandemic and ensuing lockdowns, and by December 2020, the 30-year mortgage rate dropped to a new historic low of 2.68 percent. During 2021, mortgage rates varied between 2.70 and 3.10 percent, which enabled people to purchase properties or refinance at some of the lowest rates on record.

By March 2022 however, per data from MPAMag.com, the consumer price index rose by 8.5 percent, the largest increase since 1981.

“Right now, we are at a tipping point as to whether we need to keep increasing rate hikes,” said Roche. “That dries up the refinancing. If someone bought a home in the last 10 to 15 years, it doesn’t make sense to refinance.”

Simone St. Clare, a real estate agent at Classic Real Estate Sales in Martinez, said that in January 2022 mortgage interest rates were hovering around 3.25 percent. Prior to the release of an inflation report, mortgage rates were already increasing in early 2022, up from 3.45 percent at the start of the year. Interest rates climbed to 4.5 percent by the end of March and are now at 6.5 percent and still not yet stabilized. While interest rates now compared to the last two or three years may be considered high, historical data shows that mortgage interest rates now are rather low in a historical context. Mortgage rates now are a stark contrast to those in the 1970s see Mortgage page 12B

– Verified by RateMyAgent

A seamless selling experience that exceeded my expectations!

For anyone considering listing their home in the East Bay, I would strongly advise adding Heidy Hurst to your short list of broker presentations. Her professionalism and command of the markets was immediately evident upon my first meeting and carried through the entire selling process. Heidy’s passion for excellence in staging, presentation, and marketing was above and beyond while providing advice and staying in constant communication throughout.

I highly recommend the Heidy Hurst & the Hurst Team!

– Verified by RateMyAgent and 1980s, where mortgage rates remained in the double digits due to the rising annual inflation rate, topping out with a record high of 18.45 percent in 1981.

“It’s more difficult to qualify for a loan because of the combination of high priced housing in the Bay Area and higher interest rates than last year. Last year the rates were hovering around 3%-3.5% for a fixed rate. Now they are double that,” St. Clare noted. “Most important for the community to know: you do not need 20% down to buy a home. FHA has loans that require only 3.5% down. In addition to that, there are still some programs that have either grant money to offer or special pricing for some buyers,” she added.

“While interest rates are still historically low, we are also experiencing historically low inventory of homes for sale — 42.3 percent lower than pre-pandemic numbers,” said Nancy Gonzalez, a real estate agent from Brentwood. “Some of this is because some homeowners were able to refinance or buy at such low interest rates-under 3 percent to low 3’s, that they do not want to sell as they would be subject to a 6 percent or more rate today.”

According to Banks.com, many people refinance for a variety of reasons, including shortening loan terms, converting loans, private mortgage insurances, consolidation of high-interest debts, buying investment properties, or to finance a repair or renovation to a home, such as adding a pool. The most common reason for people refinance however, is to get a lower interest rate and payment and thus save money.

“Ever heard of ‘marry the house, date the rate’? Many buyers get into a home at the prevailing interest rate then refinance when the rates become more attractive,” said real estate agent Katherine Prinzivalli. “There are currently loan programs that allow a buyer to lock in a rate, then refinance within a certain period at little to no cost.”

Differing from fixed-rate mortgages are adjustable-rate mortgages, which are home loans that begin with a low, fixed interest “teaser” rate of three to 10 years, followed by periodic rate adjustments. Whether or not an adjustable-rate mortgage may be beneficial to a potential buyer can vary, as an adjustable-rate mortgage gives individuals flexibility and predictable, low payments for a certain amount of time and thus could allow people to save money, but could also result in unpredictability and increased payments.

“ARMs are available, but mortgage investors are not aggressively pricing them thus making a fixed buydown more attractive,” said Cynthia Ulricksen of the Delta Lending Group.

St. Clare added that it’s imperative for potential home buyers to get pre-approved with a mortgage lender who can offer options.

“There are new programs designed to make it easier to afford the higher rates,” said St. Clare. “There is still help for firsttime buyers in the form of down payment assistance and some lower rates.”

Still, in spite of high rates being volatile as of late, there are reasons for optimism looking ahead.

“With higher rates, it does increase payments and decreases buying power for some, but we feel this is still an opportunity to buy since values have dipped a little,” said Ulricksen. “We have seen some improvements in the market this last month and rates are hovering around the mid-6 percent. We believe that rates will be dropping in the next few months which will create a good opportunity for buyers and it is smart to get approved now.”

More information about current mortgage rates can be found at the following link at https://www.bankrate. com/. Further information for the Delta Lending Group can also be found at https:// pacresmortgage.com/delta-lending-group.

A chart featuring additional information on historical mortgage rates can be found at this link https://www.macrotrends. net/2604/30-year-fixed-mortgage-rate-chart.

To view a video interview, visit www. thepress.net/multimedia