Soaring Mortgage Rates Have Little Effect on Lincoln Housing Market | Local

Lincoln’s white-hot real estate market has ignored every challenge that has come its way, whether it’s soaring prices or a lack of homes for sale.

Even mortgage rates that are at their highest levels in more than a decade, potentially adding hundreds of dollars to monthly payments, are having little to no effect, at least for now.

Through the end of March, sales of existing homes were up more than 10% compared to the same period in 2021.

“The March numbers are still very high for existing homes,” said Kyle Fischer, executive vice president of the Lincoln Realtors Association. “Listings are up, pending sales are up, and closed sales are up.”

Kyle Fischer

Courtesy picture

New home sales are doing even better, up more than 35% from a year ago.

This contrasts with what is happening nationally. The National Association of Realtors recently reported that existing home sales fell in March to their lowest pace in two years, while new home sales were at their lowest pace in four months.

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Lawrence Yun, the group’s economist, said he believed sales could fall 10% nationwide this year.

At least one local economist agrees that interest rates could have a chilling effect on home sales.

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“Rising interest rates will reduce housing demand in the months ahead,” Bureau of Business Research director Eric Thompson said recently.

Another potential effect of rising mortgage rates is lower house prices.

Most people buying a home need to get a mortgage, which means the decision on what they can afford is based more on the monthly payment than the actual price of a home.

When interest rates rise, they make the same house more expensive.

For example, the average rate on a 30-year mortgage at the start of the year was 3.2%. For a $200,000 loan at this rate, the monthly principal and interest payment would be approximately $865. As of last week, the 30-year average rate had risen to 5.1%, which adds about $220 a month to the payment on that same $200,000 loan.

Rich Rodenburg of Coldwell Banker NHS Real Estate said he saw some potential buyers reduce their price range due to higher rates.

Rich Rodenburg



But the possibility of a price drop remains theoretical at this point, at least in Lincoln.

So far this year, prices are up from last year – 11% for existing homes and nearly 20% for new homes.

Ben Barrett, branch manager of Belay Bank Mortgage, said he does not see the current trajectory, where buyers often bid well above the asking price, as sustainable.

“But there is a lot of underlying strength in the housing market that will prevent a collapse in house prices,” he said in an email.

Barrett said there are a number of factors that will keep the market from experiencing a crash similar to what happened in the mid-2000s, including buyers in better financial shape and tougher mortgage underwriting.

Freddie Mac, a quasi-government entity that buys mortgages on the secondary market, believes there will be very little change in the mortgage market for buying homes.

In a recent quarterly forecast, he predicted that mortgages for buying a home would grow from $1.9 trillion last year to $2.1 trillion this year, and to $2.2 trillion in 2023.

Ben Barrette


But the forecasts are not good for the refinancing market.

In the same forecast, Freddie Mac predicts mortgage refinance applications will fall by two-thirds, from $2.8 trillion last year to $960 billion this year and $535 billion next year.

Most people who have purchased homes in recent years have secured low interest rates, and many existing homeowners have taken the opportunity to refinance loans at rates of 4% or less.

In fact, a recent report by online real estate website Redfin estimates that more than half of homeowners with mortgages have rates below 4%.

That means there’s very little point in refinancing mortgages with rates above 5%, Barrett said.

“It might make sense for a debt consolidation at these rates if they’re getting out of higher-rate consumer debt, or if the homeowner decides to stay in their current home for another 10 years and use a withdrawal to make a major renovation project with their social capital so strong at the moment,” he said.

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Contact the editor at 402-473-2647 or [email protected]

On Twitter @LincolnBizBuzz.

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