In recent developments that have sent ripples across Long Island’s real estate market, the average 30-year fixed mortgage rate has soared to a startling 7.22%, marking its highest point since last November. This uptick represents the fifth consecutive increase, significantly impacting the buying power of prospective homeowners during what is traditionally the busiest season for property sales in the region.
Mortgage: The Climbing Cost of Homeownership
The steady rise in mortgage rates arrives at a particularly challenging time for the Long Island housing market. As Sam Khater, chief economist at Freddie Mac, points out, “On average, more than one-third of home sales for the entire year occur between March and June.”
With mortgage rates climbing, the dreams of many would-be homeowners are being recalibrated, as higher rates translate directly into higher monthly payments. This financial strain is forcing some buyers to either opt for less expensive homes or exit the market altogether.
Local Impact and Buyer Resilience
Despite the national uptick, the local response has shown a degree of resilience that defies past trends. Larry Matarasso, a mortgage broker at Green River Capital in Plainview, observes that, unlike previous spikes, the current rise in rates has not deterred buyers as significantly.
“As opposed to the past, [when] every time the rate hit 7% people didn’t want to buy, now I think people are accustomed to the rates being in the neighborhood of 7%,” Matarasso explains. This adjustment in buyer sentiment reflects a new normal in the housing market’s financial landscape.
Economic Context: Inflation and Federal Reserve Policies
The backdrop to this surge in mortgage rates is a broader economic scenario marked by persistent inflation.
Despite efforts by the Federal Reserve to maintain its benchmark interest rate to curb inflation to a 2% target, U.S. consumer prices have continued to climb, registering a 3.5% increase in March from the previous year.
The link between inflation and mortgage rates is a direct one, as lenders increase rates to compensate for the diminished purchasing power of money.
Average mortgage rate climbs to highest level since late November https://t.co/UkBLCP92AM
— The Oregonian (@Oregonian) April 18, 2024
Selma Hepp, chief economist at CoreLogic, suggests a cautious outlook: “The Fed announcement signals there isn’t enough confidence that inflation will continue to drop toward the 2% target… We don’t expect a meaningful dip in mortgage rates for the remainder of the year.”
A Tight Market with Few Signs of Relief
On Long Island, the scarcity of available homes exacerbates the situation. Many homeowners, benefiting from previously low rates, are reluctant to sell, fearing they will have to commit to a new mortgage at a much higher rate.
This reluctance has contributed to a stark shortage of homes for sale, intensifying competition among buyers and further inflating home prices.
Larry Matarasso sums up the sentiment, indicating little optimism for a relaxation in market pressures soon. “With a major drop in rates unlikely, I don’t expect to see enough homes hit the market this spring to reduce competition among buyers.”
As Long Island’s real estate market navigates through these turbulent financial waters, both buyers and sellers are urged to stay informed and consider their options carefully. The current climate presents unique challenges, but also opportunities for those who can adeptly navigate the evolving landscape.
