Nov. 7, 2023

This paid piece is sponsored by Central Bank.

Markets might change, but the need to buy and sell a house doesn’t disappear.

While the years of record low interest rates are a thing of the past, at least for now, making a move doesn’t have to be put on hold.

“In most cases, not delaying building or buying is better long term, even if media reports have convinced you this is a bad time to buy due to prices and interest rates,” said Peter Jenkins, mortgage loan officer NMLS #1136071 with Central Bank.

“When you compare the ‘cost of waiting,’ you often find it is actually cheaper to make your move or build before prices, due to appreciation and inflation, increase long-term costs. It might seem like a jump now, but you’ll actually save money in the long run assuming normal market conditions over a 30-year period.”

The fact is, “there was no way we could sustain the low rates we experienced in 2021 and 2022 as house prices continued to increase at a historically fast rate,” said JoAnn Linn, mortgage loan officer NMLS #1254154 at Central Bank.

“This year, house prices have stayed relatively healthy even with the rising rates. I still think homes are going to appreciate in the coming year, and I’ve not experienced any issues with appraisals not coming in at value.”

The current rate environment isn’t anything new to Central Bank’s experienced mortgage lending team. They’ve been there, seen that and are positioning borrowers to find the fit that’s best for them.

“For someone just beginning their story in homeownership, I would say that if you can afford it today, it most likely makes sense,” said Adam Cooper, mortgage loan officer NMLS #1963175 at Central Bank.

“Rates are cyclical and will come back down to where most folks will be able to refinance. Homes likely will continue to appreciate in our area. There’s a reason they say, ‘Marry the home, date the rate!’”

Navigating the market

Still, today’s rates are part of the conversation for prospective buyers – and it’s one the Central team can help you navigate.

“I look to arm customers with data,” Cooper said. “So we’ll look at average home appreciation, what they might be paying in rent if that’s applicable, and we pull as much data we can around their specific situation to help them become more educated buyers.”

Adjustable-rate mortgages are another option. These shorter-duration home loans often offer lower interest rates, though it’s important to understand how they function.

“You need to understand that after a certain amount of time, adjustments to your rate will be made, so you need to be aware of that so you can prepare or refinance,” Linn said.

If you’re contemplating new construction, there are other considerations.

“Ask yourself: Can I afford to finance this property six to 12 months from now when I’m securing permanent financing?” Cooper said. “As we’ve seen throughout 2023, rates can rise and rise quickly. You don’t want to spend all that time building, planning and changing things to find out rates have changed so dramatically you can no longer afford the property.”

Always plan to have excess cash on hand for overages and upgrades, Jenkins added.

“Large commercial projects always have a large contingency fund in the budget, and most consumers forget to have that planned,” he said. “You’ll enjoy the process with fewer frustrations if you expect or plan for 5 to 10 percent in additional costs beyond your initial building estimate.”

Stay in touch with your lender as changes are made to make sure they won’t affect your loan structure at the end of construction, Linn advised.

“If you haven’t locked into a rate with your single-close construction loan, start looking at rates about 90 days from the home’s completion,” she said. “Your lender should be able to advise on how rates are trending and when might be the most opportune time to lock in your rate.”

Also, as home affordability becomes tighter, be prepared to have some tougher conversations.

“Knowing what’s really important in your next home is incredibly helpful, especially when couples are involved,” Jenkins said. “Some people end up sacrificing bedrooms and regret it later. Some spend a little more for outdoor space they want – a covered deck or fire pit – and never regret it despite a larger payment. If you know what’s really important and budget for that, most people are very glad they bought that next home.”

Looking ahead

To put the market in context, mortgage rates have been about average compared to their pre-2008 levels. “But they’re still higher than any time in the last 15 years, and they might stay there a bit longer,” Jenkins said.

Some forecasting calls for a mild recession at the start of 2024 though, and if that materializes, rates might moderate.

“If that happens, the Federal Reserve could lower rates, which would trickle through the economy for any sort of borrowing and hopefully will stimulate the real estate market with lower interest rates compared to 2023,” Cooper said.

Despite the roller coaster year, Linn said expect some rate relief ahead.

“We should have reached or are close to the peak,” she said. “Come spring 2024, we will see relief in rates – but I wouldn’t expect a large decrease.”

It’s not too soon to start planning your home purchase. Reach out to Central Bank’s experienced team of lenders by stopping in any Central Bank location, or click here to learn more.

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