Purchasing Power

The fear of missing out on low mortgage rates could “supercharge” the housing market ahead of the spring homebuying season, but not necessarily in markets where inventory is scarce.

While rates are expected to increase steadily throughout 2022, many potential home buyers may try to jump into the market now before rates rise further. The fear of missing out on low rates, or ‘FOMO,’ and the potential loss of house-buying power may supercharge the housing market ahead of the spring home-buying season.

First American’s analysis of the potential impact of rising rates shows house buying power would fall by $36,000 from November if mortgage rates are at 3.7 percent when the spring home-buying season kicks off, and by $52,000 if they hit 4.0 percent.

While forecasters hadn’t expected to see rates at that level until later this year or next, rates have been headed up sharply as investors reconsider how aggressive the Federal Reserve will be in fighting inflation. But inflation is also boosting many families’ incomes, and rising household income could offset all or part of the impact rising mortgage rates have on housing affordability. If household income keeps increasing as rapidly as it did in November — approximately 0.6 percent — through the end of 2022, the decrease in homebuying power with mortgage rates at 3.7 percent would be $700, instead of $36,000, Fleming said.

Of course, if home prices keep going up, homebuyers could still find themselves being priced out of homes they could have afforded if they’d gotten off the fence.

Rising interest rates can affect how much home you’re able to buy. If you’ve been even slightly interested about jumping into this real estate market while you can, let’s talk about your options and what this all means for you.