South Florida Sun-Sentinel (Sunday)
Are buyers running out of time?
Rising mortgage rates add to worries of those seeking homes in South Florida
Anxious South Florida homebuyers fighting scarce supplies and new out-of-towners are facing another source of angst as they search for that elusive new home: rising interest rates.
After months of historically low rates during the COVID-19 economy, the cost of a home loan is inching upward again — away from those historical lows that helped stimulate a surge of homebuying and the refinancing of previous loans.
Buyer interest has been resilient in the face of the COVID-19 economy, according to Realtor groups, brokers and lenders. Prices, in turn, have spiked well above listing levels as bidding wars are breaking out among multiple buyers competing for the same home.
Now, interest rates that were as low as 2.5% for a fixed 30-year mortgage in January have risen past 3%.
“The 30-year fixed mortgage rate climbed to 3.26% last week, which is the highest since last July,” said Joel Kan, the associate vice president of economic and
industry forecasting for the Mortgage Bankers Association in Washington. “Signs of faster economic growth, an improving job market and increased vaccine distribution are pushing rates higher.”
“We’re still expecting a ballpark 3.5% by the end of the year, maybe a little higher,” Kan said in an interview Thursday.
Thus far, the buyers keep coming as they continue to file increasing numbers of conventional and government mortgage applications, according the MBA.
The race to buy
One of the lucky successful buyers is Nathan Beauchamp, a financial adviser for a nonprofit in Miami who just moved into a three-bedroom home in Pembroke Pines. His rate:
2.875%.
“We started looking last September — the housing market is really crazy,” he said. “We made multiple offers on multiple houses. People were willing to pay an additional $10,000 or
$20,000 over market value. It took us awhile — three offers on three houses.”
“Our initial offer was rejected because there was a cash offer on the table, but the guy just pulled out and the owners were wondering. … They started to contact the Realtor to see how serious we were. We were preapproved.
A few days later the offer was accepted.”
But would-be owners such as Jennifer Correa and her fiancé in Davie are nervously watching the rates rise while they inspect one home after another. While qualified to borrow, Correa says that multiple times, they have been edged out by cash buyers paying higher prices.
For now, the couple and their son live in a rented apartment in Davie. They
both work out of their home and space is tight. Correa, a meteorologist for CBS4 in Miami, delivers her weather forecasts from a makeshift studio in their apartment.
“We just lost two homes because of cash offers,” she said. “A lot of people from the north are selling their homes and coming to Florida and putting up cash.
“It’s very unfair because we’ve done everything right. We know we can close. We have the money to do it
through financing. The sellers want to wait for that cash offer or above appraisal and get the largest amount.”
Her agent, Alison Pusey of Compass Broward, said a combination of migrants from the northern U.S., buyers who placed their searches on hold because of the pandemic and new first-time buyers such as her client are all chasing the same negligible inventory.
“Our current inventory, there’s nothing,” Pusey said.
“We have to call the other agents to see if they have anything coming on.
“It’s really hard for buyers,” she said. “A lot of people are trying to rush and buy now because they’re worried about the rates going up for sure.”
There’s good reason to worry about the rates going higher.
Loftier rates could cost a buyer almost $100 a month on a $240,000 mortgage, according to a Bankrate calculator. Assuming a buyer puts down 20% on a $300,000 house and finances $240,000, the principal and interest at
2.5% is $948. At 3.25%, it’s
$1,044.
Goodbye to sub 3% rates
“People with preapprovals from last month are starting to see the rates go from the 2s to the 3s,” Pusey said. “And the prices are going up.”
Doug Leever, mortgage sales manager at Tropical Financial Credit Union in Miramar, said his institution is now securing 30-year loans for clients at 3 ⅜%.
“There is a little bit of a panic out there,” Leever said. “It’s hard to find a rate in the 2s.”
His rate forecast: “They’re definitely going to be up. I don’t think they’re going to be out of sight. They should be very low compared to where we’ve been in the past.”
If they stick to the Mortgage Bankers Association’s forecast, buyers may breathe a collective sigh of relief.
Three years ago, in March
2018, the situation mirrored today’s rate dilemma for buyers. Back then, local real estate brokers and lenders reported homebuyers accelerating their searches just as they are now.
Many quickly signed up for 30-year fixed rate loans — but at rates that were higher than they are today:
4.58%.