House prices, mortgage rates up – Times News Online
Published on June 01, 2022 at 2:45 p.m.
Rising house prices are forcing some buyers out of the market, while interest rates could curb an overheated real estate market.
“All eyes are on the recent spike in mortgage rates, which has reduced the pool of eligible buyers and led to lower mortgage applications,” said Howard Schaeffer, president of Greater Lehigh Valley Realtors.
Howard said the average interest rate for a 30-year fixed loan was over 5% in April. This is the highest level since 2011, according to mortgage company Freddie Mac.
Rising interest rates are also slowing down the refinancing market. The number of refinance applications is down 70% from the same time last year, Howard said.
Kristen Obert, broker and owner of Iron Valley Real Estate Northeast in Palmerton, agreed that interest rates were going to have an impact on the real estate market.
“Rising rates reduce a buyer’s purchasing power,” she said. “Many buyers now have to redeem their rate, which increases their closing costs; this, combined with higher interest rates, increases monthly mortgage payments.
Obert said there was still a steady influx of people from New York, Philadelphia and New Jersey buying homes in the area, but she worried that rising prices would push local residents into homeownership.
“There are local buyers, who have been pushed out of the market, who are still waiting to be able to buy,” she said. “My concern for the real estate market is how to provide affordable and sustainable housing.”
The Housing Affordability Index for Carbon County was 100 in April. The index measures the affordability of a region. If the index is 120, for example, that means the median household income is 120% of what is needed to qualify for a home at the median price at prevailing interest rates. A higher number means greater accessibility, according to the Realtors Group. An index of 100 is the lowest point of affordability before housing prices become too expensive for most people.
The average sale price in Carbon County in April was $214,228, down from $194,919 in April 2021, according to the Realtors Group.
Howard said prices are also rising in Schuylkill County.
“Housing in Tamaqua, for example, would cost $10,000 and now you can’t touch anything for less than $80,000,” he said.
Previously low interest rates attracted buyers, but now low inventory and supply chain issues affecting construction costs have all played a role in driving up housing costs, estate agents said .
Michael McGee, chief executive of the Pennsylvania Association of Realtors, said the cost of labor and materials were rising, so the cost of housing and new construction had risen.
“It’s a huge problem that contributes to the issue of housing affordability,” he said.
McGee also found that land development costs increased by tens of thousands of dollars over the years.
“That in itself increases the lack of affordability,” he said.
McGee said a six-month supply of homes is considered healthy, but Pennsylvania has fallen to 2.6 months. Inventory is even lower in Carbon County, which is only a month old, according to the Lehigh Valley Realtors group.
On the other hand, if a person sells a house, the market can be seen as a bargain.
Howard said: “If you put a dot on the map, everyone is a big winner. Carbon County has had a stellar few years, partly because of what this county has to offer, but also because home buyers are looking for inventory not available in other contiguous areas.
When will house prices go down?
“In my opinion, I think the market could slow down by the end of the year,” Obert said. “Rising inflation and interest rates will reduce the buyer’s ability to buy.”
Howard said: “Experts keep telling me 2023, but I don’t see it.”