Uncertainty can be a scary feeling, especially when it comes to finances. Homeownership is one of the most rewarding yet challenging endeavors in your life. Purchasing a home may be the largest financial decision you'll make, and you might be hesitant when many knowledgeable professionals send mixed signals about the housing market.

We'll talk about what experts say about the current market and some important housing topics to consider regardless of the market. If you're on the fence about buying a home, hopefully, this offers some encouragement during these crazy times. At the very least, I hope it helps answer some of your questions surrounding the current real estate market. 

Are the big, scary mortgage rates too high? 

Mortgage rates have been the hottest topic in the industry in the past six months. I enjoy listening to podcasts and YouTube videos to stay current on industry trends. You can't listen to a real estate or mortgage podcast for 10 minutes without hearing about how the real estate industry is "red-hot," and listings are selling extremely quickly for above asking price. The combination of low mortgage rates and inventory has caused the hot market. 

You may have heard about how the federal reserve (commonly known as The Fed) is raising interest rates to cool down the market. Two things will help calm the market. Increased inventory (supply) of houses or higher prices that buyers are unwilling or unable to pay (demand). The easiest way for The Fed to impact the market is by adjusting the federal funds rate. Bankrate describes this as the "interest rate at which banks and other depository institutions lend money to each other." For home buyers, this makes it more expensive to borrow money. In theory, fewer people will be interested in buying as the rate to borrow becomes more costly.

Consumers are seeing rising mortgage rates, which begs the question: are mortgage rates too high? The short answer is, "It depends." Perspective is key here. Are you asking if mortgage rates are too high to buy now, or are they high compared to similar historical periods? You will get a completely different answer depending on your circumstances.

In 1970, mortgage lenders were charging as high as 17 percent interest. Rates consistently declined to 8 percent by 2000. According to Freddie Mac, they reached an all-time low in 2021, averaging below 3 percent. Someone who has been in the industry for a while will suggest that interest hovering around 5 percent is still extremely low. Of course, 2 percent over 30 years can amount to a significant chunk of cash. There is no doubt that borrowers from 2 years ago got a fantastic rate. 

Suppose 5 percent is too high for your comfort level. In that case, you might be waiting years before it comes back down to the historic lows. One way to counter the higher rates is by refinancing. After a few years of paying down the loan, either rates will come down, or at the very least, you will have some equity built up. You can renegotiate a lower rate or get a shorter loan to accumulate less interest. 

The bottom line: for those considering buying soon, it's still a good time to buy. Rates are historically low and will likely continue to rise until the market is balanced. Planning to wait it out might cost you valuable years of building equity and living in your own house. Ultimately, everyone's financial situation is different. It's always smart to speak with an expert before deciding to apply for a mortgage.

Why is now a good time to buy? [Pros and cons of the current market]

The previous section talked about the slight increase in mortgage rates, although they are still historically low. Some buyers have been priced out of the market or will need to save more money to afford the higher rates. The benefits must outweigh the downside of a slightly higher rate if you're going to make the big decision to buy.

A fixed-rate mortgage allows you to lock in your rate. It is even more crucial to get a fixed rate in an unpredictable market. The Fed has stated that it will continue gradually increasing the federal fund rate until the market is more balanced. Locking in your rate protects you from the volatility that might occur once the market reaches a breaking point. The discouraging outcome you want to avoid is buying at the peak price for a high-interest rate. You could get stuck with an overpriced home at a high-interest rate. Refinancing would be much more difficult or even impossible. 

Luckily, the market is still predicted to climb, as demand hasn't slowed much, and inventory is low. With the rising interest rates, some buyers have chosen to wait and see if they will go back down. This means less competition for those that choose to stay in the game. As a result, home prices are starting to sell at more reasonable prices. It's too soon to tell if this means the market is slowing. Houses are still selling at record prices and with multiple offers. It is trending in the right direction for buyers, and sellers have to negotiate more than in the last few years. 

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