SAN DIEGO (KGTV) - Rising interest rates on home mortgages are putting potential buyers into a difficult decision: buy now before rates climb more, or wait until rising rates slow the market?
Local realtor Bridget Potterton says it's a tough choice, especially for those who don't have a lot of cash to make a massive offer.
"It's absolutely stressful. Occasionally, I'll have clients losing sleep over things," Potterton said. "There will be some tears, especially when they lose out on a property they thought they had a good shot at."
While rates were in the 3% range just a few months ago, a standard 30-year fixed-rate mortgage with a 20% down payment is likely in the 5% range, a huge difference. For example, Potterton pointed to a four-bedroom, two-bath home she listed for $877,525 this week in San Marcos. With that standard mortgage, the monthly payment has jumped $900 from what it would have been in January.
Potterton says that quickly rising rates have prodded more people to jump into the market in the short term.
"You see people doing that. They want to get a jump on. They think, 'Okay, rates are going to continue to go up," she said. "My payment's going to go up, so it's probably better for me to pay a little more now but lock in my rate."
But as rates climb, she believes it will force more potential buyers to drop out of the market.
"You're going to see some fall out from that. You're going to see some buyers getting cold feet," Potterton said. "You're probably going to see less offers on some properties."
While that is expected to have the effect of lowering the competition for some homes, it is not expected to have enough of an impact to lower home prices. Potterton says there isn't enough inventory to meet demand, keeping prices costs high.
So homebuyers will have to decide what is more important between making huge offers now in a highly-competitive market or waiting until competition dies down and paying more due to rising rates.