Mortgage rates have skyrocketed in recent months, more than doubling from the start of the year. It’s having a noticeable impact on the market in the D.C. area, making already expensive houses even more so.
That probably won’t change either, but that doesn’t mean there aren’t things buyers can do to save some money.
First off, if you’re hoping that you’ll start to see prices decline a bit, you might have to wait a while.
“The market is different today and the buyer certainly has more leverage [than before],” said Mike Fratantoni, the chief economist with the Mortgage Bankers Association. “That’s because there’s more inventory on the market and fewer bidding wars then before.”
However, the D.C. region doesn’t seem to have any indicators like population outflow, people losing their jobs and places with too much housing that suggest home prices might start to decline.
“I don’t think any of those three factors really fit the D.C. market well,” Fratantoni said. “I’m less worried about outright declines here, but certainly expect home prices to go up much more slowly the next couple of years than they did the last two.”
In the meantime, there are three ways he suggests buyers can adjust their tactics when it comes to buying a home.
“Look a little bit farther out, drive a little bit farther,” he said. “Maybe they’re not going into the office every day, that means they can afford a place with a little bit more of a commute.”
He also said the increase in smaller loans being processed means some buyers might be downsizing their original goals, either buying a smaller house than they originally wanted or they’re closing on a town house or a condo instead. And he said the number of mortgages with adjustable-rate mortgages (ARMs) are also starting to climb.
“The payment might be fixed for the first five, seven, or 10 years and then adjusts after that,” said Fratantoni. “By opting for that ARM, they can significantly lower their mortgage payments. We’re certainly seeing the share of loans that are adjustable go up from closer to 3% last year to almost 12% this year.”
While all of that might save you money in the long run, everything that caused such an acceleration of the market in recent years means that you’re still going to pay more than before in the short run.
“From the beginning of the year we’ve seen mortgage rates on 30-year loans more than double,” Fratantoni said. “For a typical borrower, that means a mortgage payment up more than $500 a month, really impacting affordability across the country and certainly in this area.”
