Buffalo, NY (WBEN) As the Federal Reserve announces another hefty interest rate hike, mortgage rates are going up as well and local real estate experts tell WBEN there's already an effect on the local housing market.
"The chief indicator of mortgage interest rates, the 10 year T-Bill has already accounted for that rise in interest rates," said Peter Hunt of Hunt Real Estate. "But nevertheless, they've gone up by almost two fold, in a very short period of time, as far as mortgage rates go," says Hunt. He says there will not be an immediate impact, but we'll see in the next couple of weeks and months, how the bond market will react, which will be the largest determinant in mortgage interest rates.
Hunt says the housing market has cooled off already. "I was at a meeting in Montreal with a group of real estate brokers from all over North America, and in my poll of how people are doing year over year, there was a range of reduction in unit volume and sales volume of between some 20 and 45%. And that's right now that's not even looking forward. That's as of right now. So it's, it's it's already having an effect," says Hunt. He adds this region will also be affected.
Hunt adds the interest rate hike affects affordability, as mortgage rates go up as well. "If the interest rate is the 3%, I obviously can afford a lot more mortgage money than at 7%. So the fact of the matter is, if you take the difference from 3%, to say, 7%, the reduction in affordability is approximately 30%. So I can afford a 30% less valuable home today than I might have been able to afford based on the same amount of affordability eight months or nine months ago," explains Hunt. But he notes Fannie Mae is predicting that prices will come down by about a point and a half in 2023, where there's already been a 9% plus increase in prices in 2022.
Joel Husvar of the Buffalo Niagara Association of Realtors says he's already started to see a change in the housing market as well. He says people's dollars aren't able to go as far as they used to as the rates go up. But he says this still isn't as bad as it's been in the past. "If we look back at the last 50 years of mortgage rates 8% is about the average of where we were. We just saw that, you know, we got so comfortable with the two and a half 3% interest rates, but eight is about the average of the last 50 years," explains Husvar.
Husvar says there's still a market for housing in the region, but anticipates a slowdown. "We're going to see a little bit of a slowdown in offers on houses. However, good houses that are marketed well, and really in good shape, they're still getting that over asking price activity," notes Husvar. He notes some houses are sitting a little bit longer than they were before and he's starting to see a few price reductions on some properties that probably were priced a little bit high because of the multiple offers of the past.
Husvar believes we're getting closer to the normal market we saw a few years ago.
