The year has kicked off with unwelcome news for the market. Still, now might be a good time to buy for plenty, LO suggests
A dip in mortgage rates at the end of last summer sparked hopes of a prolonged tumble – but that proved short-lived, with the 30-year fixed average beginning to climb again and stopping just shy of 7% at the beginning of the year.
New Mortgage Bankers Association (MBA) data shows rates hit a six-month high for the week ended January 3, a sobering reminder of the current challenges facing the housing market as the mortgage industry gears up for 2025.
Still, that upward trend in rates isn’t likely to see swathes of buyers move back towards the sidelines, according to an Arizona-based brokerage president and senior loan officer.
Jay Lessard (pictured top), of Sonoran Lending, told Mortgage Professional America that while the jump in mortgage rates had been a prominent discussion point among clients, many were also realizing that trying to time the market was a fruitless endeavor.
“I think what you see happen is people just get to a point where they realize they have to move for some reason,” he said. “They might be moving for a change in their family; it could be just moving forward and upgrading their house. They’ve got some type of reason that’s causing them to want to move.”
Kris Radermacher of K2K Mortgage shared her strategy for navigating the competitive mortgage broker market, focusing on branding and not stressing over losing clients to larger competitors. https://t.co/wgN0sh9s4S#MortgageBroker #ClientRetention #AI #MortgageIndustry
— Mortgage Professional America Magazine (@MPAMagazineUS) January 7, 2025
Buying now could be the safest option, broker argues
Seeing a mortgage rate close to the 7% mark might be initially dispiriting to hopeful borrowers, Lessard said – but if they can stomach a payment at that level, many come to realize that it may be in their interest to move ahead with a purchase rather than wait for rates to fall.
Buyers in the current market can often negotiate seller credits to cover closing costs and rate buydowns, he pointed out, with temporary rate buydowns especially advantageous when clients may be able to refinance their mortgage down the road.
“We educate them about those options and then let them choose,” he said. “You find that in the beginning, people tend to be a little turned off by the rates in the seven range. But as they get going through the process, they realize, ‘OK, we’re just going to have to make some adjustments and keep moving forward.’”
Rates are expected to dip again in the coming 12 months, although most economists’ housing forecasts don’t see the average 30-year rate sliding below 6%.
Still, if rates tick towards the love sixes, that could see a “massive flood” back into the market, according to Lessard. “Even though a couple of years ago that would have been considered high, people have gotten used to the 7% range,” he said.
“Once it drops a little bit, it’ll feel like there’s a massive improvement, and those that are sitting on the sidelines waiting are going to jump back out there.”
Why waiting it out could cause more homebuying pain in the long run
In September, the average rate plunged to its lowest level for two years, dropping to 6.08%, and while that proved a short-lived trend, Lessard said phones started ringing “off the hook” when it occurred.
That’s a cautionary tale to buyers who can afford to purchase now but are holding out for lower rates down the line, he said.
“Even if you get back in an environment where you’re competing with 10 or 15 people, that’s tough,” he said. “Then you’re starting to offer over asking price. You’re paying more for the house. You’re having to come out of pocket with more cash.
“With a lot of the buyers that we see right now, if they were in that position they wouldn’t be able to buy. They would just be stuck still renting. So we’re trying to get buyers like that to really take advantage of the fact that you can get a seller to give you credits right now and take advantage of those credits in different ways… and then if we see rates improved down the road, we’ll look at refinancing at that point and get you into that lower-rate category that’s there.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
