Despite higher mortgage rates, buyer activity in the housing market has been on the rise. The National Association of REALTORS® reported that existing home sales increased by 1.9% in March 2022, which is the highest level in over a year. The increase in buyer activity is surprising given that mortgage rates have been rising steadily since the beginning of the year.
There are several factors contributing to this increase in buyer activity. First, the pandemic has made people reevaluate their living situations. Many people are now working from home and need more space, which has led to an increased demand for larger homes with home offices and outdoor spaces. Second, the housing inventory is low, which has led to a more competitive market. Buyers are willing to pay more for a home and are not deterred by higher mortgage rates. Finally, the economy is recovering, and people are feeling more confident in their job security and financial stability.
Higher mortgage rates can have an impact on home affordability, but the impact is not always as significant as it may seem. For example, a 1% increase in mortgage rates may only increase monthly payments by a few hundred dollars, which may not be a significant deterrent for many buyers. Additionally, mortgage rates are still historically low, and buyers are taking advantage of the opportunity to lock in a low rate before rates increase even further.
Buyers are also finding creative ways to afford homes in a higher interest rate environment. For example, some buyers are opting for adjustable-rate mortgages (ARMs), which have lower initial rates but can adjust over time. Others are choosing to make larger down payments to reduce their monthly payments and overall interest costs.
Overall, the increase in buyer activity despite higher mortgage rates is a positive sign for the housing market. It suggests that the demand for homes is strong, and buyers are willing to adapt to changes in the market to achieve their homeownership goals. As the economy continues to recover and the housing inventory remains low, we can expect buyer activity to remain strong in the coming months.
