The Housing Market and You in Late 2022

If you’ve kept your fingers on the pulse of the housing market in 2022, you know it’s been a heart-pounding year. Home prices skyrocketed. Inventory was next to nil. Mortgage interest rates were low—buyers could at least benefit from this pandemic-driven factor. Recently, however, the Federal Reserve hiked rates, and now the fevered market is beginning to cool. 

What does this mean for you as you weigh the prospect of buying a house, refinancing a home loan, or improving your home? Here are a few things to ponder as you proceed.

If you’re hesitant to buy a home right now because of rising mortgage rates, know that other people are too. As buyers back away from purchasing properties, sellers list their homes for lower prices. When these houses don’t sell and new listings appear, the result is an enlarged inventory for potential buyers—which means a wider variety of homes to choose from for house hunters. Even as rates are on the rise then, other factors are in play that may make the present moment a good time to buy a house.

While buying a home may make sense, the thought of refinancing your home loan may seem imprudent if the mortgage rate on your current loan is lower than the latest market rates. At the same time, there are several reasons you might want to consider refinancing right now. 

For example, if you are paying mortgage insurance premiums (MIP) because you have a conventional loan and you were unable to pay 20% of your home’s value when you purchased it, refinancing could position you to cancel your MIP. While higher mortgage rates should still be kept in mind, if the savings from canceling your MIP make your mortgage more affordable overall, you may wish to proceed. 

Refinancing may also make sense if you do so to shorten the term of the loan. If you are currently paying on a 30-year loan, for instance, you may save money on interest in the long run if you refinance for a 15-year loan instead. Crunch the numbers for yourself with a loan calculator to find out if you could benefit from this option. 

If you are interested in improving your home, on the other hand, it may be wise to consider using a home equity line of credit (HELOC) to finance it. A HELOC works like a credit card, so you only end up paying interest on the amount you spend. Furthermore, if you use your HELOC to buy, build, or improve a home, the interest you pay should be tax deductible! 

In the end, we know the ever-changing housing market can cause paralysis when it comes to buying a home, refinancing, or simply giving your fixer upper a facelift. At First National Bank of Sycamore, we want you to know that you never need to weigh your options alone. As your local lender, we are here to help you make decisions that will benefit you and your loved ones today and in the future. Reach out to us today for assistance—we’re ready to help you navigate the nuances of the housing market!