What rising mortgage rates could mean in Richmond
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Mortgage rates surged late last week, hitting 5.78% — the largest one-week increase since 1987, according to Freddie Mac.
Why it matters: "For a typical buyer, their monthly payment now on a $400,000 loan is about $800 higher compared to what their loan would have been at the rates we saw last year," Duane Buziak, mortgage sales manager for the Richmond branch of Christensen Financial, tells Axios.
State of play: Low mortgage rates — just below 3% a year ago — made buying in a sellers' market more affordable during the first year of the pandemic.
- But now, prices are high, and borrowing money is more expensive too.
Threat level: The dynamic shows signs of a cooling housing market that could soften home prices, according to last month's Richmond Association of Realtors Market Report.
Yes, but: Some buyers are still going to be "more gung-ho than ever" to buy a home, Mair Downing, a Richmond real estate agent with Shaheen, Ruth, Martin & Fonville Real Estate, tells Axios.
- "They consider real estate a more favorable investment compared to the stock market," she says.
What's happening: Supply continues to be an issue in Metro Richmond, down 22% year-over-year, according to Richmond MLS data.
- And some parts of Richmond are seeing even bigger supply shortages.
- Inventory in the city proper is down 36.4% year-over-year as of May.
- It's down 37.5% in Henrico and 45.5% in nearby Ashland.
What we're watching: Buziak tells Axios that he suspects rising rent prices — up 24% in Richmond since the start of the pandemic — will keep many potential buyers in the market, while rising mortgage rates may convince many existing home owners to stay put.
- "So we may see some longer term challenges in housing inventory if rates stay at this high level," Buziak says.