As we are nearing the end of Q2 2022, the rise in June mortgage rates appears to be slowing down compared to the speed at which interest rates are increasing.
June Mortgage Rates Expected to Remain Steady at 5%
So far, June mortgage rates are slightly down to 5.09% from May 2022’s 5.27%, according to Bankrate’s national survey of lenders.
Despite the slowing increase in mortgage rates, it is still significantly higher than what they were a year ago. In June 2021, June mortgage rates for a 30-year fixed-rate loan were only 2.99%.
Freddie Mac’s chief economist Sam Khater says the current rate levels are affecting housing affordability and purchase demand. He said, “Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing.” This is somewhat pleasant news, considering the market’s unprecedented tightness over the past year.
However, despite the incremental drop in June mortgage rates, the overall trend is still pointing north. This is already taking into consideration the huge difference from last year’s rates. Inflation is one of the main factors for this upward movement. The ongoing global supply chain issues and geopolitical events could reverse the situation. But that is still left to be seen. Experts at this time are showing concerns about a possible recession in the near future.
Related: Mortgage Rates Watch: May 2022
Tug of War Between Sellers and Buyers
We may be heading into the more pleasant temperatures of summer, but the borrower forecast appears to be cloudy. Mortgage applications dropped to 2.3% for the last full week of May 2022.
Mortgage Bankers Association associate vice president of economic and industry forecasting Joel Kan said, “Mortgage applications decreased to their lowest level since December 2018, as the purchase market continues to struggle with supply and affordability challenges.”
According to the MBA, a shrinking refinance market drove the decline. The refinance index went down by 5% in the last week of May from the week before. The refinance share in mortgages went down to 31.5% from the previous week’s total share of applications of 32.3%.
At this point, there is a tug of war between sellers and buyers in the bond market. Nadia Evangelou, the National Association of Realtors’ director of forecasting, pointed out that sellers are concerned about inflation while buyers are worried about the economy. She says she expects the upward trend to continue. It takes into account the Federal Reserve raising short-term interest rates by half a point in its June and July meetings.
Real Estate Investor Dilemma
Real estate investors are currently facing a dilemma. As June mortgage rates hover steadily, property buyers and refinance prospects are wondering whether to sit this one out or take a chance and secure rates now.
Investors who have their eyes on certain income properties for sale are faced with a tough decision to make. If they proceed with buying real estate, who’s to say they will get a good ROI on rental property? At least, is it good enough for them to achieve their investment goals?
Will it be better for them to switch to an adjustable rate mortgage (ARM) or stick it out with fixed-rate financing? As interest rates on 30-year fixed-rate go up, ARMs are getting more popular among homebuyers and real estate investors.
Another question on a lot of investors’ minds now is, “Is the real estate market worth betting on at this time?” While the real estate market is considered a more stable investment vehicle compared to other asset types, investors are giving it more thought and approaching things with more caution. While experts agree that a housing market crash is unlikely to happen, you can’t blame investors for being very cautious and apprehensive about how things are going all over the world today.
That being said, investors who are intent on purchasing property at this time should do their homework. They need to find not only the best possible mortgage options but potentially profitable investment properties as well.
A website like Mashvisor can help investors today find the right property that lines up with their investment goals.
How High Will Mortgage Rates Go in 2022?
In last month’s mortgage rates watch, we highlighted how the rates have changed in a year. From April 2021 to April 2022, the trend pretty much went up and down incrementally. It stayed within the 2.80% to 3.80% range from April 2021 until February 2022.
It was only in March 2022 that mortgage rates dramatically increased and made their way up to a flat 5.00% rate. April 2022 ended with a 5.22% rate on a 30-year mortgage. And, as already mentioned earlier, May saw a very slight increase of 5.27%.
Between April and May this year, mortgage rates dropped four times in five weeks. At this rate, experts claim that the tug of war between worries about inflation and the economic slowdown will help stabilize interest rates for now.
Experts are now saying that mortgage rates will most likely hit a plateau near their current levels. It somehow negates initial 2022 housing market forecasts that interest rates will continue to go up until the year’s end. Although some mortgage experts are saying that rates are still likely to spike in the near future.
C2 Financial Corporation’s Jim Sahnger has this to say about our situation today, “Inflation drives interest rates higher, and that’s what we’re living with.”
However, despite the prevailing inflation, one thing that is giving real estate investors and professionals hope is how the housing supply has also increased. It is true that home prices are also on the rise, but eventually, they will slow down because of mortgage prices.
The forecasts for 2022 may have economists anticipating a continuous increase in mortgage rates until the end of the year, but with the recent turn of events, no one knows what to expect in the coming months.
Wrapping It Up
The bottom line is that real estate remains a stable investment vehicle even as interest rates continue to go up, though at a slower rate. June mortgage rates may be an assurance to investors about how reliable real estate investing still is compared to stocks and bonds. The important thing investors should remember this time is for them to exert a little more effort into performing their due diligence.
On top of experts’ forecasts, having a greater insight into present market conditions is an advantage. A real estate website like Mashvisor provides investors with highly accurate and relevant data investors can use for real estate market analysis. The site’s database and tools can help investors make the wisest investment decisions that will help them achieve their goals despite the present global economic conditions.
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