Updated 5/10/24
According to an article published by US News, The National Association of Realtors (NAR) expects mortgage rates will average 6.8% in the first quarter of 2024, rising to 7.1% in the second quarter, according to its latest Quarterly U.S. Economic Forecast. The trade association predicts that rates will fall in the second half of the year, reaching 6.5% in the fourth quarter.
An “interest hike” sounds alarming, but in reality, it just showcases a healthy economy. Of course, the record-low interest rates we’ve experienced in years past have made home-buying more attractive and resulted in a massive new-home surge. But, just like any other variable in the market, nothing lasts forever.
So, what does this actually mean for new home construction buyers?
Below, we’re answering this question and what impacts it could potentially have on your decision to build a new home in 2024.
1. Historically, Rates Are Still Low
Take a look at the chart below; interest rates have been steadily declining for over a few decades. Even with the current interest rates being at an average of 6.8%, rates will still be historically low. All in all, if you’re in the market for a new home, you’re still going to get a great deal.
2. Increased Borrowing Costs
Higher interest rates mean people receive a better return on their savings, encouraging them to save rather than spend. Encouraging people to save should slow the increase in prices of everyday goods. With fewer buyers in the market, sellers will find it hard to keep raising their prices. Besides mortgages, rising interest rates impact the stock and bond markets, credit cards, personal loans, student loans, auto loans, and business loans.
A rise in interest rates means everyone ends up spending more on interest payments. Essentially, the amount of money you’re paying to borrow for a life of a loan to purchase your new home will increase. Although the actual increase value is uncertain,
For example, let’s take a 30-year fixed loan of $350,000 and compare it to an interest rate of 6.8% and 7.1%.
As you can see, even if rates up to 7.1% by Summer 2024, the difference between your monthly payment would be $- which in most cases, is less than a monthly cable bill.
Knowing that the potential hike coming soon won’t drastically affect monthly payments is reassuring. However, please keep in mind rates could continue to fluctuate as we move throughout the year. The longer you wait to buy, the more money you’ll potentially spend down the road. The time to buy is now – Learn more on why waiting to build your dream home is costing you.
To help you navigate the complexities of interest rates and home-buying, we recommend using our preferred lender, RMC Home Mortgage. Not only will you get the best rate available, but you’ll also be eligible for extended rate lock options of 165, 270, or 360 days to help guarantee your rate during your construction process. Learn additional benefits of choosing RMC as your lender.
