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Real estate consumers ‘got pretty spoiled’ from relatively low mortgage rates: Broker

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My Southern View Broker Alyssa Hellman joins Yahoo Finance Live to discuss the emerging housing market, homebuyers’ reactions to rising mortgage rates, and the outlook for housing demand.

video transcript

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Rising interest rates have brought a tough time to the housing market, with both buyers and sellers on the sidelines, with 30-year fixed rates above 7% for the first time in 20 years. However, there are some exceptions to the rule. Alyssa Hellman is her My Southern View broker. Alyssa, nice to meet you. Hence the Wall Street Journal

The Emerging Markets Index includes Johnson City, Tennessee. It tops the list, ahead of Visalia, California, Elkhart, Indiana, and Northport, Florida. Fort Wayne, Indiana finished in the top five. Your town of Raleigh, North Carolina is in the top 10. What do these cities have in common when it comes to real estate markets?

Alyssa Hermann: absolutely. So I think the biggest thing you’re seeing with rising interest rates is that affordability has dropped dramatically. One thing many places in the United States have in common is that you can find affordable housing and compete just as well as many of these really competitive markets like San Francisco. , Chicago, where buyers have really cut prices, they can still afford to compete in places like Johnson City and Raleigh with higher rates.

It’s interesting, Alyssa, because I know a lot of people have moved to the suburbs. They moved to other areas for reasons of affordability when they could work remotely due to the pandemic. But with employers pressuring some workers to return to the office, do you see that happening?

Alyssa Hermann: that’s right. I’ve actually seen him in 2021 and his in 2022, and both years have seen a dramatic influx of relocating buyers in Raleigh, unlike many of the other markets you’ve mentioned. But part of it was the price cuts in these larger markets. Looking at interest rates today, the average fixed rate over 30 years is 7%. This means that 85% of current homeowners have a low rate, so it doesn’t make much sense for these people to move.

So when you start looking at affordability, how can you buy your next location? Where do you want to be in 5, 10 years? A number of other markets have indeed emerged and are joining the conversation. People say maybe I want to be closer to my family.

Especially first-time buyers with really discounted prices, I think they’re in the top 10 list. Now let’s talk about the underlying problem. Of course, mortgage rates continue to get worse. If you can put into context what it means when mortgage rates rise above 7%, let’s look at it in terms of how much your average monthly payments have gone up. And if I can work on that, how high do you expect interest rates to go in the next six months?

Alyssa Hermann: Well, I’ll answer that second part first. But my take is that interest rates have probably peaked. I think it’s gone up dramatically over the last six months, in a way I never expected. The other factor to that is that we got pretty spoiled.

Interest rates are below 4% for an extended period of time, as we have seen for a good portion of 2020, 2021 and 2022, which is not the norm. It wasn’t too long ago that we were closing in. If you look at historical interest rate history, these are dramatically lower interest rates. So I think we’re probably scratching our heads as to where we’re going. I don’t necessarily think it’s down to 3% or he’s down to 2.5%, but I think it’s going to start to level off.

The first part of your question, it’s a big change. Homeowners are paying dramatically more based on interest rates alone. Especially what you need to talk to a lot of first-time homebuyers about is that if they get approved at the 3.5%, 4% rate, I have to tell them, you really need to talk. Interest rates have risen so high that it’s actually priced some first-time homebuyers and regular buyers completely out of the price range they’re looking for, so before writing an offer Please ask the lender again. Adjust the price perfectly.

I want to ask about the stock situation, if you’re a homeowner and you’re looking at where mortgage rates are headed, sit back and enjoy the stocks, or maybe the market is bubbled up again. I’m here. Given the slow pace and lack of confidence seen from homebuilders, what are your expectations for inventory?

Alyssa Hermann: Yeah, actually, I think that has a lot to do with this slowdown. More than price, it matters where many sellers are. Over the years, especially in Raleigh, stocks have become very low due to prey to the frenzy these low rates have caused. People said I wouldn’t move because they didn’t know if I could compete in a crazy market.

Interest rates got so high that I’m pegged at 3.5% or 4%, why would I go out and size up or down and get a higher mortgage at that rate Is it necessary? I think you are seeing a lot of sellers staying because of that.? That said, real estate is he one of the basic human needs that will always function. Even during the recession of 2009, I saw people buying and selling homes, and it’s still happening.

We are still seeing movement as needed. I still see people saying that they might actually be able to compete because there are a few fewer buyers. Maybe I’m against less competition. So there are some very good opportunities if you can find the right mortgage rate. Another factor that I think is really important is that we’re used to saying ‘OK, I’m closing this house’. You can forget about mortgage interest rates until you are ready to.

That’s not what we’re recommending to anyone right now. Instead, go ahead and find the lowest possible rate. But once you buy it, watch the rate. Once you see them starting to decline, consider refinancing and save your money there. Just because you bought at the current rate doesn’t mean you have to keep that rate in the process of owning the home.

Now Lefis has mostly disappeared. Alyssa Hermann, nice to meet you. Thank you very much.

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