Demand drops, which is good news for buyers.
The lack of homes for sale over the last few years had been good news for sellers. Especially when coupled with low mortgage rates, it had been a decidedly seller’s market. But with mortgage rates rising, demand has softened. Gone are the crazy bidding wars driving sale prices above asking before the home had even been listed. And that’s great news for buyers.
The average number of offers received per listing has dropped by more than half in the last three months. Homes priced well still sell relatively quickly, but those priced at the top of the 2021 market will linger. For buyers who can afford it, the power dynamic is in their favor.
Solution to higher interest rates? Flexing an ARM.
Adjustable Rate Mortgages (ARMs) are seeing a comeback as mortgage rates go higher. These loan products, which offer a lower interest rate during an initial period of the loan before adjusting, now represent 12% of all loan applications. At the beginning of this year, they represented just 3% of all mortgage applications.
Last week, the average interest rate for a 30-year fixed-rate mortgage was 6.81%. The average rate for a 5/1 ARM, however, was at 5.6% for the first five years of the loan. These types of loans are particularly attractive to borrowers who don’t plan on staying in their home for the life of the loan or who plan on refinancing if and when interest rates fall.
Prices rose in September
Despite the Federal Reserve’s efforts to control inflation, wholesale prices rose 0.4% in September, more than the 0.2% experts had predicted. The producer price index (PPI), which measures the prices that U.S. businesses receive for their goods and services, is tabulate by the Bureau of Labor Statistics. On a month-to-month basis, the PPI rose 8.5%, similar to the 8.5% rise seen in August. These numbers suggest that the Fed will likely continue to raise their federal funds rate to combat inflation.
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