Navigating the Waves of Change: Decoding the Impact of Mortgage Trends on Home Values in 2023

July 2023 finds us at the heart of another eventful year in the real estate market. This month, we're focusing on mortgage rates – a significant influencer of housing market trends. Understanding how these rates are determined and how they affect home values is essential for both home buyers and sellers.

The Forces Driving Mortgage Rates

The Federal Reserve's monetary policy plays a pivotal role in determining mortgage rates. The Fed has revealed plans to hike their benchmark Fed Funds Rate in 2023. This rate, which pertains to overnight borrowing for banks, aims to slow the economy and curb inflation. It's crucial to understand that while the Fed Funds Rate is not directly connected to mortgage rates, its changes can indirectly impact them.

Inflation: The Invisible Hand

Inflation is another critical factor in the setting of mortgage rates. When inflation expectations rise, mortgage rates often follow suit. Why? Lenders are keen on maintaining the real value of the interest they earn on loans. When inflation rises, the purchasing power of money falls, and so lenders charge higher interest rates to compensate for this loss.

Bond Market Movements

The bond market is another significant influencer. Mortgage interest rates tend to follow the trend of long-term government bond yields. When demand for bonds increases, their yields decrease, and this trend often carries over to mortgage rates. Therefore, an understanding of the bond market's performance can offer insights into potential shifts in mortgage rates.

Credit Scores and Risk Profiles

On a more personal level, individual borrowers' credit scores and risk profiles significantly influence the mortgage rates they're offered. Borrowers with higher credit scores and lower perceived risk typically receive better interest rates. Therefore, maintaining a strong credit score can be advantageous when applying for a mortgage.

Type and Term of the Mortgage

The type and term of the mortgage also factor into the equation. FHA, VA, and Conventional loans can vary in rates from week to week. Additionally, a 15-year mortgage typically comes with a lower rate than a 30-year note. Yet, it's important to remember that different mortgage products suit different needs, and the lowest rate might not always be the best fit for every home buyer.

Assisting Programs

Amid these complexities, special programs like a 2 -1 buydown can offer some relief to borrowers. This program allows your first year's payment to be 2% below your final rate, and the second year's payment to be 1% below. Many buyers have benefited from such initiatives, which can make home ownership more accessible and manageable.

What It Means for Home Values

With these influencing factors in mind, how have they impacted home values in our local area? According to the June 2023 statistics, the median price rose 1% from the same quarter last year. Yet, the average price per foot fell by 5.1%. These figures indicate that our local home values are showing resilience amid these changes, creating a robust landscape for both buyers and sellers.

Conclusion

In this ever-evolving real estate environment, the guidance of seasoned professionals becomes all the more crucial. Our team remains committed to providing you with tailored market insights and expert advice to navigate these changing tides. Whether you're planning to buy or sell a home, or simply wish to understand the market better, don't hesitate to contact us.

Knowledge is the key to making informed decisions. And in real estate, informed decisions can unlock doors to new opportunities. As we continue to sail through 2023, stay tuned for more insights and updates from our end.

Remember, the only constant is change, but in change, there lies opportunity.