If you turn on the news, it seems interest rate hikes and the shifting real estate market are a daily topic of discussion, and with good reason. Home buyers are seeing their purchasing power decrease due to increased mortgage interest rates, and their income is not going as far due to higher prices at the gas pump and grocery stores.
A 30-year mortgage on a $1M house with 20 percent down and a 3 percent interest rate (available for borrowers with good credit in 2021) would result in a monthly payment of $4,096. That same house will cost the same borrower $5,367/month at a 5.7 percent interest rate. For many, this increase in their monthly payment completely changes the affordability of the home.
“For South Santa Barbara County, June showed a -28 percent decrease in total sales YTD over 2021, while the median sales price of a single-family home is up 18 percent YTD. While statistically the market is strong and inventory remains historically low, new listings are slowly accumulating as pending sales have slowed. Buyer demand is still present, but it is not as aggressive as we’ve seen over the past few years. Rapidly rising interest rates, stock market equity decline, and overall economic uncertainty have made buyers more cautious. These factors, combined with expected seasonality, have slowed market velocity considerably,” states Kelly Knight, with Knight Real Estate Group of Village Properties.