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Housing market: is now a good time to get a mortgage?

With buying activity cooling, buyers may finally be able to enter the housing market. Yet climbing mortgage rates could make home buying less affordable overall.

CL

Chelsea Levinson, JD

10/3/2022 · 4 min read

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Key takeaways

  • Mortgage rates have been steadily climbing since the beginning of 2022, and may continue to rise — which could make buying a home less affordable. 

  • Home prices are beginning to cool, which may make now seem like a good time to get a better deal.

  • Whether now is a “good time” to get a mortgage depends on the individual buyer and their needs.

You’ve been dreaming of buying that cute four-bedroom house with unique stonework that’s been sitting on the market for a few weeks now. But with mortgage rates climbing and housing market activity cooling, you’re wondering if now is a good time. 

First things first: there's no best time to get a mortgage, and a lot of homebuying activity should be determined by need rather than waiting for a ‘perfect’ deal. For example, if you’re moving to a new state for a job that starts in November, you’re probably going to buy a home based on that timeframe, not based on what mortgage rates are doing. 

Still, it’s always a good idea to weigh your options. So, is now a good time to get a mortgage? There are a few major factors to keep in mind.   

Mortgage rates are up 

Mortgage rates have been steadily climbing since early 2022. Back in mid-September 2021, 30-year fixed mortgage rates were 2.86%. As of mid-September 2022, they’re hovering at around 6.05% — an increase of more than 3% in just one year. This is the highest mortgage rates have been since 2008, and it’s made home ownership less affordable for buyers using financing. That’s because a higher rate means a higher monthly payment, which can reduce your buying power. 

For example, let’s say you’re buying a $350,000 home with 10% ($35,000) down. 

At a rate of 2.86%, your monthly mortgage payment would be $1,304, not including insurance and taxes. 

At a rate of 6.05%, your monthly payment would be $1,898. That’s a pretty significant jump in monthly cost, especially when you add it up over a longer period of time. 

With higher mortgage rates, you may need to lower your purchase budget and go with a less expensive home.     

… And they may go up again 

The Federal Reserve has indicated that they will raise baseline interest rates again. While the Fed doesn’t set mortgage rates, lenders sometimes base their rates on that baseline Fed rate. Basically, a Fed interest rate hike tends to mean higher mortgage rates. 

What does this mean for you as a buyer? If you need to buy a home, you might want to consider getting a rate now, rather than waiting, as they could go up again. However, understand that rates can fluctuate throughout the days and weeks, so there’s no guarantee you’ll snag a lower rate at any given time.

Home prices are cooling

One bit of good news for buyers: home prices are down 6% from their June 2022 high. During August 2022, the average home sold for less than its list price for the first time since March 2021. Homes are also sitting on the market longer than they were a year ago. So now may be a good time to negotiate a lower price on a home. 

There’s less buyer competition 

Another factor to keep in mind is that along with lower home prices, there may be less competition. In August 2022, Google searches for “homes for sale” were down 26% compared with a year earlier; home tours were down 9% since the beginning of 2022, and buyer mortgage applications were down 23% since the year prior. This translates into fewer bidding wars and price escalations, giving buyers a bit more power in the housing market.

Bottom line 

There are pros and cons to getting a mortgage right now. You may save a bit on home prices compared to what you'd have paid in early 2022. But higher mortgage rates can make buying a home less affordable, and rates may continue to climb for the foreseeable future. The best time to get a mortgage will ultimately depend on the individual buyer and their unique financial situation. Talk to a trusted financial advisor to crunch the numbers and map your best path forward. 

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

CL

Chelsea Levinson, JDAuthor

Chelsea Levinson, JD, is an award-winning content creator with expertise in real estate, mortgage, and personal finance. She has written for top real estate publications like HomeLight and Bigger Pockets, and has created content for some of the world’s most recognizable brands, including Bank of America, Vox, Comcast, AOL, State Farm Insurance, PBS, Delta Air Lines, Huffington Post, H&R Block and more. When she's not writing, you can find her fixing up her cabin in the Catskills.

JG

Jena GreeneEditor

Jena Greene is the Managing Editor at Opendoor. She covers real estate, personal finance, money management, and market best practices. Jena is passionate about empowering people to find their dream homes and making the home-buying process a delightful one.