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Housing experts offer advice amid Great Recession level mortgage rates

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Posted at 6:24 PM, Apr 20, 2022

ROCKY RIVER, Ohio — Ballooning inflation, dipping inventory, volatility in world markets and supply chain issues are presenting a mixed bag of challenges for prospective home buyers in 2022. This week, skyrocketing interest rates threaten to become the next big hurdle to homeownership.

The latest national average 30-year fixed rate is at 6.875%. It’s the highest rate since 2009 and up nearly two full percentage points from last month.

“This is going to price some people out of the market. I think you’re already seeing here in Northeast Ohio and nationally a bit of a cooling,” said Michael Goldberg, an associate professor of design and innovation at the Case Western Reserve University Weatherhead School of Management.

Data suggests some would-be home buyers are starting to back off from a white-hot housing market already plagued with low inventory and high housing costs. The Mortgage Bankers Association’s seasonally adjusted index shows mortgage applications have dropped 5% in the past week.

Veteran real estate and mortgage professionals caution, the rapid changes shouldn’t be cause for alarm.

“Branches in Florida and California, they’ve always kind of seen this level of competition. It’s new to Northeast Ohio, so a lot of people panic. But honestly this is actually a normal, functioning market - even where the interest rates are at,” said Rick Rucker, the Gold Star Mortgage Financial Rocky River branch manager..

He explained mortgage rates in recent years have been historically low and are now rebounding to more normal levels. Though the rates have climbed quickly, the economy is fundamentally different than in 2008 and Rucker said the same risks of a Great Recession-era housing bubble burst no longer exist.

“When people are acting like the world is over because mortgage rates are going up to an actual sustainable level, we tell everyone to just calm down,” he said. “The price of rent is 100%.”

Denise Robinson, the Community Development Officer at CHN Housing Capital, added, “Things like rates don’t become as important as getting the right house or getting a payment that you’re going to be comfortable with.”

CHN Housing Capital is the lending arm of CHN Housing Partners, a non-profit focused on connecting low-income families to affordable housing. The organization offers the Believe Mortgage, which gives qualified buyers a low down payment and no monthly private mortgage insurance payment (PMI), with the completion of first-time homebuyer classes.

Edwin Capeles closed on his first home in December. He described the home buying process as stressful, taking three months of dedicated research and multiple bids before securing a home.

“So many people were fighting over the houses. Me and my wife would go look at a house and we were crossing families inside the houses, there were so many,” he said. “We were at the point [where] we were frustrated. We were really frustrated.”

Seeing mortgage rates rise to their current levels, Capeles is grateful he purchased a home when he did. Because of his status as an Army and Navy veteran, he qualified for a 2.8 percent mortgage rate.

“For the next 30 years, I’m set at that rate,” he explained. “Everything is timing.”

He encourages other prospective homebuyers to see if they qualify for assistance programs or lower mortgage rates.

Robinson and Rucker echo the advice. They also recommend doing research, getting preapproval and locking in interest rates sooner rather than later.

Capeles added, “Be patient, be consistent and don’t give up.”

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