What is impact of interest rate hikes on Vermont home buying market?

BURLINGTON, Vt. (WCAX) – Interest rates jumped last month to 7.5% after the Fed took action to cool down inflation. It may have slowed down housing markets across the U.S., but has it done the same in Vermont?

Vermont’s housing market remains hot but with regional cooldowns starting. Inventory in Chittenden County remains low, but in resort areas like Stowe and Waterbury, Vermont Association of Realtors president Michael Hickey is watching inventory grow. “What we are finding is that people are recognizing is that their buying power is changing,” he said.

Hickey says the interest rate hike to over 7% is shifting peoples’ perspectives on what’s affordable. That 7% translates to about $710 more a month than homeowners would have paid had they secured a $300,000 fixed-rate mortgage in January. “Every quarter percent — depending on where you are looking — decreases your buying power,” he said.

Hickey says clients are now revisiting their brokers or banks to determine what they are qualified for. What they qualified for six months ago might not be the same now. “If you went and you were qualified for, let’s use round numbers –$500,000 — I would say you should probably go back to your lender and find out how much you are qualified for with new interest rates,” he said.

“Raising the interest rates is meant to deter people from purchasing properties so we can see the supply get back to a stable level,” said Heather Hayes with Movement Mortgage. She says for cooling inflation, the interest rate hikes served their purpose in Vermont. “It shortens the buyer pool, so the number of people out there looking — which is exactly what it was attempting to do — to have less people out there looking for homes.”

The people it squeezed out of the market, though, were those already pinching pennies to afford a home. Hayes says she has less people going under contract. “The people who are are ones that actually need to buy — they’re sellers that need to sell. There will always be situations where people need to get into homes,” she said.

Hayes says when starting a housing search, don’t let the interest rates scare you. She believes a home in Vermont is a good investment and rates can always be reworked. “Marry the home, date, the rate — the interest rate can always be refinanced — always in quotations,” she said.

Hickey says he does expect the Fed to boost rates further in the coming days.

Copyright 2022 WCAX. All rights reserved.