Mortgage rates double since January

SIOUX FALLS, S.D. (KELO) — The Federal Reserve is meeting this week and is expected to announce an increase in interest rates for the third time this year, all in an effort to help curb sky-rocking inflation.

Monday the markets are reacting drastically, including the mortgage market where interest rates have more than doubled in less than 6 months.

“It’s the most movement I’ve seen in my career without question,” Plains Commerce Bank Senior Mortage Banker Kevin Carlson said. 

In January, home buyers were seeing mortgage rates below three percent.

“Now they’re flirting with 6 percent, which we have not seen in over a decade,” Carlson said. 

When you crunch the numbers…
“So $350,000 on a 30-year term at six percent is a monthly payment of $2098 versus at three percent its

“$1,476, so a difference of $622 dollars a month,” Carlson said. 

Home buyers are now stuck with a much higher monthly payment, for the same house.

“That’s a 42 percent increase in mortgage payments,” Carlson said of the $350,000 home purchase example. 

“Things are shifting a little bit, so it’s going to be really critical that buyers are staying in communication with their lenders,” RASE president Anne Ferrell said.

The Realtor Association of the Sioux Empire says this volatile mortgage market makes it crucial for buyers to constantly re-evaluate just how much house than can afford at the current rate.

“Do they need to shift what their price range is to stay in the realm they need to be for their monthly payment,” Ferrell said. 

“Maybe they qualified for $250,000 for a payment in November. Now they only qualify for $200,000,” Carlson said. 

But in that same time period, the price of that house in the Sioux Falls area has also increased–with home prices now nearly 22 percent higher than the same time last year.

“I’ve definitely had a few people who just threw back their hands and said we’re out, I’m done,” Carlson said. 

First-time home buyers or others searching for a home under about $350,000 dollars are seeing the highest competition.

“You’re probably going to put in more offers than what you had planned on,” Ferrell said.
Despite the higher home prices and rising mortgage rates, realtors expect the housing market to continue to grow in the Sioux Falls area.
14:04:42 certainly not going downward, they’re going to continue to go up a little bit because supply and demand is real thing,” Ferrell said. 
In May there were 40 percent fewer homes listed than the same time last year a problem that may only get worse as mortgage rates rise and homeowners become less likely to sell.
“They’ve locked in these super low interest rates and now they’re very reluctant to get out of them,” Carlson said. 
Carlson says Monday was one of the most volatile days ever recorded for the mortgage market. Crypto Currencies and the stock market also suffered heavy losses Monday, all tied to the current state of inflation and the anticipation of the FED’s rate hike increase later this week.