The market for housing mortgages is not quite as fruitful as it once was.
After interest rates remained low for decades and housing prices skyrocketed toward an apex in 2022, higher rates have cooled the landscape, leading to fewer prospective home buyers and sellers.
“They’re buying bunk beds instead of a new house because the payment is so much higher,” said Aaron Nawrocki with Capital M Lending.
Still, because of housing shortages and several other factors, home prices remain high.
With all that in mind, three Lake Oswego mortgage brokers commented on how they see the market changing and provided advice to mortgage applicants and homesellers.
Could rates continue to fall?
Nawrocki, for one, has noticed rising enthusiasm in early 2024, possibly due to rates falling slightly and people adjusting to the new environment.
“It seems like folks’ excitement level is way higher this year than last year,” he said.
Further, some brokers expect mortgage interest rates to continue to decline this year — which could facilitate another booming housing market.
Prime Lending broker Stuart Sandor said that, in his career, housing mortgage rates tend to decline during a presidential year, even though the federal reserve, which decides interest rates, is supposed to be apolitical. Mortgage rates, he said, are determined in part by the purchasing of bonds, the stock market and other economic factors.
“The government will play politics with things like Wall Street rules or convincing the Fed to print more money to make money cheaper to make it look like the current people in office are doing a good job. It’s happened for 50 years. It’s a pretty safe bet it will happen again and we’re there already,” he said.
Though he doesn’t buy the presidential election theory, Union Home Mortgage broker Larry Wisher also thought that interest rates would fall from around 6.5% to below 6% this year and then potentially below 5% the year after that. And with lower interest rates, he speculated that demand for housing would increase and the bidding wars that led to sky-high home sales may return to some degree.
But not everyone agrees with that prediction. Nawrocki felt that rates would remain relatively stagnant for the next couple of years before a new cycle begins. His reasoning is that economic cycles typically last at least three years.
“We probably still have 18 months to two years left to get back to what 2019 looked like,” he said.
Should rates impact your decision?
However, all three brokers agreed that the state of the market should not be the primary concern for homebuyers and sellers. Despite mortgage rates remaining high compared to recent history, the housing shortage and a lack of sellers (pre-2023 homebuyers often don’t want to give up their lower mortgage rates) caused a continued climb in home prices .
“If you would have told me two years ago that rates would almost triple and house prices would continue to grow, I would have said that’s economically impossible, and of course I’m wrong,” Nawrocki said.
The mortgage lenders also said that prospective homebuyers are being more conservative than they used to be when assessing mortgages.
“What’s interesting to me is most people still qualify for more than they want to spend and
the common misconception is that the bank will say no, but most times folks say no because of their budget,” Nawrocki said.
Though rates are high, the mortgage lenders said now isn’t a bad time to buy because people might get a solid price for a new home. They also noted that lower mortgage rates aren’t necessarily a good thing because they can lead to spiked demand, bidding wars and ballooned sales prices. Plus, they said that a homebuyer who purchases now can always refinance down the road.
“Don’t be so hypersensitive to rates today because they will go back down and, if you find a house you’re interested in making an offer on and you qualify (for a mortgage) and can handle the payment, those are all the reasons to tick the box and make an offer,” Wisher said.
Wisher also has seen homesellers offer credits to buyers and recommended buyers look into negotiating a temporary interest rate reduction.
“You date the mortgage but you marry the house. Check the box for the house and the loan you get today you are not going to keep long. You have the opportunity to refinance to lower the rate later,” he said.
However, Wisher said there is some logic to waiting to sell your home as prices could rise with lower interest rates.
“If someone wanted to wait until selling in peak season, that might benefit them. Or wait until rates move downward. There will be a larger pool of buyers to work with,” Wisher said.
Still, Nawrocki said homes are selling just fine if they are in good shape and priced right. Lake Oswego and other Portland area suburbs in particular are a hot market, he added.
Sandor felt that listing early could give a seller a leg up on the sellers market.
“If it doesn’t sell, that tells you maybe the price is too high or maybe you need to freshen it up,” he added.
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