How to navigate today’s housing market

With mortgage rates still hovering around 7%, does it make sense for potential buyers to make the jump and purchase their first or forever home this year?


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With mortgage rates still hovering around 7%, does it make sense for potential buyers to make the jump and purchase their first or forever home this year?

There are a lot of things to consider when you are making a large purchase/investment of this kind that you will own for the next 5-20 years.

Interest rates

The 30-year mortgage rates are at a national average of 7.23% and a 15-year mortgage is at 6.76%. These are over double from when rates hit an all-time low over three years ago.  This means that you are committing to a much higher payment than what you are most likely paying if you own a home. If you purchased a $450,000 home and put 20% down to avoid PMI (private mortgage insurance), you have a mortgage of $360,000. You would be paying $1,000/month more for that payment than what it would have been three years ago when rates were at 2.65%

Where are the rates expected to go? Will the Feds finally decide to cut these rates?

After 11 rate hikes, we have yet to see any reprieve in lowering of the rates. The Federal Reserve has rates at a two-decade high and as 2024 moves on there seems to be less and less confidence that they will lower the rates. Some experts think that they won’t lower the rates until March of 2025!

With that said, mortgage rates are expected to drop to 6% and lower in 2025. So, if you moved forward with that purchase, there’s a high probability that mortgage rates will be considerably lower in the next 12 months and then you can consider refinancing your loan into a more favorable one to save you hundreds of dollars a month.

What should buyers and sellers consider when making this tough decision?

For sellers, remember that the market is driven by supply and demand. This is a seller’s market still. There isn’t a lot of inventory out there so listing your home this year is sure to bring in an offer soon. By waiting, yes, your home will most likely increase in value, but so will the home that you are looking to purchase after you sell your current home.

For the buyers, you must consider the average growth rate on housing increased by 5.5% last year nationwide. In Wisconsin, the average price increased 65% in just the last four years! So, if you’re waiting for just the rates to come down to 6% or lower, you will most likely be paying another $15,000-$25,000 or more on that same property next year. Also, when rates start dropping, get ready for a lot of competition, which means possible multiple offers on the houses for sale, and that could bring us back to offers above list price again.

Last tips for homeowners and future homeowners

It’s important to be ready when you make an offer. There’s a difference between a “pre-qualified” letter and a “pre-approval” letter from the bank. The pre-qualified letter doesn’t guarantee that you are approved for the loan — just that you fit the parameters of the loan. There’s too much ambiguity in those letters without any repercussions to the potential buyers if they don’t qualify. They’re not out any money and they just wasted a bunch of everyone’s time.

The pre-approval letter lets the buyers, sellers, and the realtor know that you are serious and committed, showing that you put in the extra time and effort working with the bank/lender to submit all documentation needed to actually get approved for the loan.


Mike Kojonen

Mike Kojonen is an Investment Advisor Representative and the founder and owner of Principal Wealth Services and Principal Preservation Services. He can be reached at: zvxr@cevapvcnycerfreingvbafreivprf.pbz