The rate for a 30-year mortgage is increasing to the highest level since June, but that doesn’t seem to be slowing the market in Norman, according to local experts.
According to weekly data released by federally chartered home loan mortgage corporation Freddie Mac, 30-year fixed-rate mortgages averaged 3.18% for the week ending April 1, after dropping to a record low 2.65% in January.
Rob Schaerer, broker and associate of Dillard Group Real Estate and 360 Realty, said a client of his recently locked in at 3%, and the rate one actually receives depends on the area, among other factors.
“It is also dependent on the borrower,” Schaerer said. “There’s a lot of circumstantial stuff that ends up playing a role in the final APR that someone gets, such as the amount of properties they have.”
Schaerer said one lender’s current overall portfolio is at 14% investment loans. He said while that is not a significant amount, it’s substantially higher than what Fannie Mae and Freddie Mac are willing to do.
“There’s going to be a huge disparity based on the lender’s portfolios of loans that is going to have some lenders be much higher in terms of their rates than others, and I think that has spilled over into the owner-occupied category,” Schaerer said.
Mortgage applications dropped 2.2% from last week, according to data from the Mortgage Bankers Association’s weekly survey. Application rates have decreased in 10 out of the last 12 weeks since mortgage rates hit a record low.
“For every little bit that people’s payments go up, there’s going to be a certain number of people that are going to be removed from the market, or move down from one market to another, in terms of price point,” Schaerer said.
As rates trend toward pre-COVID levels, Schaerer said the fear of missing out will be the driving factor in the market, even with hindsight clouding one’s vision and making what may be a good rate currently seem less appealing.
“There may be a short term pullback in the market as people are trying to say ‘we’ll wait for interest rates to go back down,’ but at some point, interest rates are not going to go back down,” Schaerer said. “For a financial institution to say they’re going to lend $200,000 to somebody for 3.18% for 30 years is a little absurd.”
Terry Teel, mortgage banker with Bank of Oklahoma in Norman, said the rate climb in recent months has had little effect on the lender side as buyers are expecting the rates to rise.
“People aren’t saying they don’t want to buy anymore, or anything like that.” Teel said.
Despite the rising rates, Schaerer said he is continuing to see record low inventory, and new homes are being built at a quick pace.
Schaerer said currently, buyers are still willing to pay above list price and get what they can before it’s gone.
“I have seen situations recently where people are waiving appraisal contingencies, which is the new big thing to hit our market,” Schaerer said.
According to Forbes, waiving an appraisal contingency can strengthen a potential buyer’s offer from the perspective of the seller. After an appraisal contingency is waived, the buyer can’t back out and renegotiate the purchase price if the appraisal price is less, which can be an indicator that the buyer is serious about purchasing.
“In the past, when an independent appraiser the bank sends out goes and values the house at the lower amount than the contracted purchase price, it has kind of reined in the market a bit,” Schaerer said. “As competition gets more fierce, it becomes a situation where, in order to get a house, the buyer is going to have to be able to figure out terms that are more inclined to get the seller to accept it.”
With the market in its current state, Teel said it’s important for prospective buyers to find a lender they can trust who’s willing to thoroughly explain the details of the process.
“Over the phone is great, but it’s helpful to a lot of first-time homebuyers to be able to sit down and talk in person,” Teel said.