Changing rates shouldn't prevent shoppers from getting into the market

July 26, 2017

Many would-be buyers may be concerned about the impact rising prices are having on affordability, but rates are falling again, and should continue to do so for some time to come. As such, it's important for real estate professionals to make sure their clients understand what affordability really means in today's market, and what they may be able to do to find better deals.

While home prices remain on the rise - a trend that's expected to continue for some time to come - hopeful homebuyers may be able to get a bit of relief from still-low mortgage rates, according to CNN Money. Rates reached the mid-4 percent range earlier this year as part of a post-election surge, fell back below 4 percent, and started to rise again. The good news is that these rates are expected to linger for some time longer, but experts now believe there's a possibility they could rise before the end of the year as the Federal Reserve Board considers rate hikes for shorter-term lending. 

Inventory issues linger
Of course, most shoppers today also face bidding wars thanks to the extremely constricted inventories of homes for sale nationwide. However, experts advise that starting the shopping process now may be key, because while rates are still below 4 percent, they aren't likely to stay there for the rest of the year.

Industry insiders say now is the time for many shoppers to get into the market, locking in prices before they keep rising and taking advantage of the rates available now. Doing so could help average buyers save tens of thousands of dollars over the lives of their loans.

In addition, it may be wise for agents to suggest their clients obtain a home warranty, which can further add cost certainty to a transaction by protecting them financially if something were to go wrong with the systems or appliances in their newly purchased homes. In a lot of cases, it may even be possible to get sellers to add these warranties themselves, despite a number of people bidding for a property.

Rate increases difficult to predict
While experts can say with certainty that rates will rise at some point - after all, they're not likely to hover near all-time lows forever - it's difficult to predict exactly when and how much they will do so, according to Real Trends. What is clear is that there's no reason to expect rates will hit pre-recession averages - which often hovered between 5.5 percent and 6 percent - at any point in the near future. Moreover, consumers often conflate headlines about the Federal Reserve Board raising rates with a direct link to increases in mortgage rates. However, the kind of rates over which the Fed has direct control tend to be shorter-term lending, meaning that while mortgage rates for loans stretching 15 or 30 years may rise, it won't be because of the Fed's decisions in and of themselves.

It's important for agents to talk any client through the ups and downs of the real estate process, explaining what goes into rate changes and home price increases. Helping them potentially improve their credit standing - to gain access to better rates - or find other ways to keep costs down, such as with a home warranty, could go a long way toward building strong relationships.