It’s crazy out there in the world of real estate. You don’t have to be a Property Brother, House Hunter watcher, or even a real estate agent to know that.

All you have to do is look at home listings … drive by an open house … or better yet, ask someone who recently bought a home.

You’ll quickly learn that prices have been sky high, inventory way low, and the competition so fierce that the Olympic games seem like a walk in the park.

And all that doesn’t even take into account one of the most important factors impacting the real estate market – rising interest rates.

But what does it all mean, especially if you’re thinking about buying, selling, or refinancing a home? And what if anything is expected to change?

To answer those questions, we tapped the expertise of Avidia’s resident real estate lending expert, Don Frost (DF), Executive Vice President of Consumer Banking.

Don, what’s happening with interest rates?

DF: Mortgage interest rates are on the rise. At the end of last year, a 30-year fixed-rate mortgage was around 3%. Now, it’s between 3.875 – 4%. People have been hearing a lot about the Fed hiking interest rates, but it’s important to know that those hikes impact short-term rates, not necessarily mortgage rates, though they may continue to rise as well.

How do rising rates impact the real estate market?

DF: Higher interest rates definitely can impact the market. The monthly payments for homes will rise and buyers will qualify for less, which could reduce the number of buyers in the market. Another factor that will impact the market is rising inflation. With the cost of food and gas higher, people have less money in their pockets, influencing their ability to afford or even consider buying a home.

What’s the market for home sellers?

DF: There’s no question that it’s been a great year for sellers, who’ve have had all the negotiating power. We’ve all heard stories about houses selling within hours for well over asking price and buyers waiving contingencies like home inspections in order to gain a negotiating edge. We expect that with rising rates and inflation, we’ll see less competition for homes, which could result in lower prices.  Recently, we’ve seen some softening in the market with houses remaining on the market for longer.

Are people still refinancing?

DF: In 2021, people continued to take advantage of low rates to reduce their mortgage payments or get cash out. We don’t expect the same level of activity this year due to rising rates. There are, however, situations such as home improvements or changing life circumstances that may make refinancing a good option. But, it’s important to remember that even in low rate environments, refinancing isn’t always the right decision. It depends on how much you’ll save and how long you plan to live in the home.

What advice do you have for buyers and sellers?

DF: If you’re thinking about buying a home, don’t waive contingencies like a home inspection. A home inspection can help you uncover costly problems in the home before you buy it. Also, if you’re not in a hurry to buy a home, you may want to wait until more inventory gets on the market, which will give you more choice and less competition.

If you’re thinking about selling a home, understand that the current market might change as more inventory becomes available and rising interest rates and inflation may cause people to put off buying a home. If you do sell, make sure your home is priced right because homes that are priced too high may sit on the market longer, making them harder to sell.

Who can people talk to about their mortgage or real estate plans?

DF: Give us a call at (800)508-2265 or stop into any Avidia branch. Or, you can start the mortgage application online from home.  We’d love to hear about your plans and tell you about some of the options that work best for you. Honestly.

Don Frost NMLS# 12462