SACRAMENTO, Calif. — Buying a home just got more expensive in the United States as the nation now sees the highest mortgage rates since 2002.
The interest rate on a 30-year home loan increased to over 7% when in 2021 it was at 5%. This is also the fourth week of consecutive increases.
Christopher Brown is a broker with Next New Homes Group which is currently building in Elk Grove.
“Not really a surprise at all we’ve been expecting this,” said Brown. “We’re still in that low 7% range and while it does make it less affordable our market is still relatively affordable for the state of California.”
Two years ago, home buyers could've gotten a home worth $670,000 with a monthly mortgage rate of $3,000. Today, residents are seeing that same mortgage rate on a $400,000 home.
The Sacramento market isn't expected to take too large a hit, but 100 fewer homes have been sold this year when compared to this time last year.
“It's almost like we have this situation where low supply and low demand have met, you know, which is a strange dynamic,” said Ryan Lundquist appraiser and housing analyst.
Which is why Brown still feels confident his new build will sell despite the high rates. Homebuyers staking their claim before it’s even built.
According to Red Fin in Sacramento, a home only sits on the market for 10 days. Houses are selling for 2% to 5% above asking price.
This is causing a shift in the market. High interest rates are cutting into the resale market.
First time homebuyers are hurting the most from the change.
“On the new home side, we are the only ones that have supply in the market because there are a lot of people locked in on the resale world that don’t want to sell their home because they are locked into that two or three percent interest rate,” said Brown.
Economists are now predicting the rate will not drop anytime soon.
“Something stable whether that’s at seven or six and a half if we hang out in that range for a period of time that stability helps us. We are starting to see more and more people coming back into the market that were searching for last year because of the interest rate run up but are starting to realize this is the new normal,” said Brown.
One tip to try and lower your mortgage rate is to shop around — apply for a loan with multiple lenders. On average, that could save you $1,200.
