If you’re one of those who have been noticing the increase in home mortgage rates, you’re not alone. What do these increases mean for you as you and how do they impact your ability to purchase a new construction home?
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A growing economy means more demand, higher costs
The United States’ economy has been in a growth mode. Based on this, experts expect the Federal Reserve to raise interest rates. This means the cost of borrowing money will increase; however, the good news is that mortgage rates and Fed rates are not linked to one another.
Usually, as the economy strengthens, the Fed raises rates to help curb inflation and temper the market. So, while rising rates are a positive signal for the economy as a whole, there are some consequences that aren't always positive for potential homebuyers. Increasing rates can make buying a home more expensive.
Over recent months, home mortgage rates which were historically low, have increased modestly and yet, are still highly affordable. Each time the Fed raises (or lowers) rates there are consumers that become concerned, since many people are unaware that mortgage rates and the Fed's rate are not tethered together. Think of it this way the short-term rate hikes as a good sign the economy is strong. A strong economy fuels demand which will keep the housing market strong.
Charleston home prices on the rise along with mortgage rates
According to the Charleston Trident Realtors Association, in December 2021 the median home price for the entire Greater Charleston market is $350,000. In December 2020, the median home cost in the market was $300,000. Demand is high in the Charleston region and this is reflected in the increase in home prices in our market.
Using the Carolina One Mortgage calculator, a buyer of a $350,000 home will make a mortgage payment of $1,841 per month, assuming a 3.6% interest rate with 20% down payment including taxes and insurance. A year ago, using the mortgage rate of 3.5%, and keeping all other variables the same, a buyer would have paid $1645 per month including taxes and insurance, or $196 dollars less at the lower interest rates.
Quick 2021 Real Estate Market Stats for the Charleston Tri-County*
Berkeley Co.
- Single-Family: Median Sales Price: $337,900 (up +17.7% from 2020); Sellers received 100.3% of asking price with an average 18-days on market
- Townhomes: Median Sales Price: $230,000 (up +15.1 from 2020); Sellers received 99.7% of asking price with an average 19-days on market
Charleston Co
- Single-Family: Median Sales Price: $502,000 (up +18.1% from 2020); Sellers received 98.9% of asking price with an average 25-days on market
- Townhomes: Median Sales Price: $300,000 (up +18.1 from 2020); Sellers received 99.2% of asking price with an average 31-days on market
Dorchester Co
- Single-Family: Median Sales Price: $315,000 (up +15.8% from 2020); Sellers received 100.2% of asking price with an average 15-days on market
- Townhomes: Median Sales Price: $227,500 (up +23 from 2020); Sellers received 100.6% of asking price with an average 15-days on market
Spring on into the market to lock in prices and rates
Wise buyers will move into the market sooner rather than later. You must go ahead and get prequalified for a mortgage you can afford and be ready to apply for a mortgage for the house of your choice. [Read our articles on mortgages.]
New home builders in the Lowcountry are building competitively priced new homes, however, home buyers need to be aware that high buyer demand, is not the only factor driving up new home prices. In Charleston home buyers are experiencing increasing real estate priced due to land cost increases, increasing labor costs, and materials cost increases.
If you think you want to purchase a new home, now is the time to move wisely into the market. Get prequalified, visit area new home communities, review plans and lots and choose your home sooner rather than later.
*Source: Current as of January 7, 2022, All data from the Charleston Trident Multiple Listing Service. Report © 2022 ShowingTime. Data deemed reliable but not guaranteed. Consult your agent for market specifics. Stats include total homes sold (new & resale)
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