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No debate about mortgage rates

In the housing market, interest rates are king. And queen. And prince and princess. From a financial standpoint, mortgage rates rank as the top variable that impacts a home buyer’s decision.

Compared to just three years ago, those figures have remained high. That has stoked broad concern among analysts that buyers would rather wait out interest rate hikes and re-enter the market; here, the magic number hovers in the 3% range.

But that could make for a long wait. All signs point to further Fed hikes in its bid to tame inflation — and there’s little doubt that Fed chair Jerome Powell is frustrated that he can’t cool the job or housing markets. (Too bad, Jerome: Every job seeking, house hunting/selling American feels the exact opposite way.)

Still, go figure — literally. The average rate on a 30-year fixed rate mortgage has risen recently to 6.65%, according to Freddie Mac data. True, that’s nearly double where it stood in January 2022, but experts are still cautiously optimistic buyer interest will pick up as the spring season rolls on.

Read more: Americans are paying nearly 40% more on home insurance compared to 12 years ago — here's how to spend less on peace of mind

Housing tours de force

House shopping involves more than checking in on Zillow, even if they’ve cornered the market on fire-gutted mansions in the South. Housing tours are up, real estate brokerage firm Redfin announced in late January, as more customers request them and initiate the homebuying process. In some markets such as Seattle, Palm Beach, Fla. and Richmond, Va., bidding wars have returned, the firm said.

In other markets, old school negotiation is making a comeback. Redfin’s report suggested buyers may have adapted to mortgage rates in the 6% range after 7%-plus rates scared them off in October 2022.

Meanwhile, sellers who in 2021 could take advantage of low inventory and comparatively lower rates — the stuff of universal bidding wars — now face buyers who will choose wisely based on the moderating but still elevated rates. As Redfin and others have reported, sellers have been more willing to make concessions.

Some closure on foreclosure

Foreclosure starts reflect another facet of the market’s strength.

Starts were down 34% compared to 2019, according to ATTOM Data’s Year-End 2022 U.S. Foreclosure Market report. Year-over-year starts were up in December 2022 but down between November and December. That suggests government lending rules and an overall strong economy had contained foreclosures.

Data compiled by ATTOM shows more than 90% of borrowers in foreclosure have positive equity, “which they appear to be leveraging in order to avoid a foreclosure by refinancing their mortgage or selling the property at a profit,” the group said. “It seems likely that this is a trend that will continue in 2023.”

So if you’re looking to make a move — buying, selling or maneuvering past foreclosure risk — remember this stock market corollary: market timing. Getting in and out of a stock at an ideal time appears easy to do, but it’s virtually impossible. No one could have foreseen, even a year ago, how much mortgage rates would jump. Will they take off again tomorrow? We know the Fed is eyeing more rate hikes.

The bottom line is that when an opportunity pops up, especially if it means a superior school district and/or a better quality of life, you may want to jump on it. No need to pursue a mansion scarred by fire — just take stock of your finances and your burning desire.

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About the Author

Chris Clark

Chris Clark

Freelance Contributor

Chris Clark is freelance contributor with MoneyWise, based in Kansas City, Mo. He has written for numerous publications and spent 18 years as a reporter and editor with The Associated Press.

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