Why you shouldn’t halt your home search, even though interest rates are on the rise.
- Mortgage rates are fluctuating but still significantly higher now than they were throughout 2021 at the start of 2022.
- Rents have steadily climbed alongside demand in Newport County, making saving for a down payment more challenging.
- Buyers can start accruing equity from the moment they buy, regardless of interest rate.
Anyone whose been seriously considering buying a home in Newport County has been watching interest rates rise significantly, then lower slightly, though additional increases are expected on the horizon. The Federal Reserve increased mortgage interest rates six times in 2022, and we’re expecting rake hikes into 2023. But it’s worth keeping perspective.
In March 2020, as the pandemic crisis started, interest rates plunged to record lows and remained under 3% through 2021. As inflation began to soar this year, so did interest rates. While elevated mortgage rates aren’t ideal, today’s 30-year fixed-rate mortgage rate is still below the U.S. historical average.
As variables change in Rhode Island’s real estate market, so does decision making. Some buyers might find renting in Newport County more appealing than buying right now. While holding off might be the right decision if your credit and finances aren’t where they need to be, the reality is, rents have increased locally and throughout Rhode Island.
Higher rent makes it more difficult to save for a down payment. Moreover, as homeownership costs increase, so does rental demand in Newport. This makes both finding and securing a rental challenging.
Bottom line: both rental rates and mortgage interest rates will continue to rise.
The Good News
Higher interest rates do have a few silver linings. First, increased rates quickly separate casual buyers from serious buyers looking for homes in Newport County. As the buying pool shrinks, buyers have more leverage.
Second, we’ve seen inventory throughout Newport County increase. This is a far cry from during the pandemic, when housing supply hit a record low and buyer demand skyrocketed. While inventory in Newport still isn't abundant, and supply isn’t outweighing demand, there is more to choose from since many buyers have decided to wait.
Third, homes are staying on the market longer in the Newport real estate market compared to what we’ve seen over the past two years. Bidding wars, multiple offer scenarios, all cash offers and waived home inspections, and waived contingencies seen during the peak of the red-hot housing boom are fewer. Today, buyers looking for a home in Newport, Rhode Island, have room for negotiation, and that’s one of the many pivotal areas where working with a Realtor, especially one with experience in Newport’s housing market, is critical. Now you have a chance to jump back into the market and enjoy searching for a home with less competition.
Building Equity = Building Wealth
No matter where the interest rate stands, the moment you buy a property in Newport County, you start building equity. With each principal payment, you chip away at what you owe, and if you're able to pay a little over principal each month, it’s beneficial as that amount will accrue and go toward reducing the total amount of interest paid over the life of the loan.
As the National Association of Realtors explains, home equity gains are built up through price appreciation and by paying off the mortgage. Although the rate of appreciation has slowed, they are still going up. The takeaway is simple: pay a mortgage, gain equity, increase your wealth.
Why a Realtor Right Now
Yes; the market is cooling, but it’s still a seller’s market in Newport, Rhode Island. While you’ll see headlines pointing to national averages, they’re just that – averages. Supply and demand are unique to specific locales, each with its own nuances.
Experienced Realtors in your market are well versed in these nuances, and typically have a network of colleagues who have clients looking to buy, considering selling, or might know about a property coming to market before it’s listed.
Realtors are also removed from the emotions that can develop throughout the home buying process, and thus, can come to a negotiation with a researched-based approach based on comps and other data points. A Realtor is your advocate and well versed in the legal jargon that will protect your interests during the negotiation process. Remember, anything that arises before the closing, whether it’s financing or a serious issue uncovered during the inspection, can restart negotiations.
Questions about buying Newport County real estate?
Contact Teri Degnan Real Estate & Consulting