As home prices and the number of sold Chicago homes continues to rise each month, another metric is moving on up as well: mortgage rates.
The Wall St. Journal reported last week that mortgage rates rose above 4% for the first time in about a year. Rates hit 4.15% the first week of June, up from 3.59% just five weeks earlier. The jump equals about a 15% increase in the cost of borrowing (or about $50 to the national average mortgage payment).
Buy Chicago Real Estate Before Rates Rise
The increase in rates isn’t expected to disrupt the housing recovery we’ve seen over the past several months, but it does mean one thing—if you’re in the market to buy a home, you should do so. Now.
I have been selling real estate for more than 23 years, and have seen this play out like clock work: interest rates go up, and people get off the fence and start thinking they need to purchase real estate. A rise in interest rates is typically an indicator that the economy is improving, and economists are predicting 3 to 3.5% growth in 2014 and for unemployment to drop below 7%. If that happens, there’s a strong chance the price of real estate will have no where to go but up.
I’ve talked to many clients who are plagued by the “coulda, woulda, shouldas” when it comes to real estate in Chicago. The timing of a purchase can’t be pinpointed exactly, but signals like this are a clear indication to buyers that the window of opportunity is quickly passing by. Every one-percentage-point increase in mortgage rates makes purchasing a home about 10% more expensive for buyers, so it’s crucial to act fast before we see another rise in rates.
But keep in mind—even though interest rates have gone up a bit, this is still a good time to purchase Chicago real estate. Despite the slight hike, mortgage rates are still a bargain for buyers. Numbers are still near record-lows when it comes to home loan rates, so buyers can still get in the door with a very affordable loan.