Navigating Rising Interest Rates: Strategies for Homebuyers in the Phoenix Metro Area

Family Pulling Downward Against Rising Mortgage Interest Rates in Phoenix Metro Area

With interest rates on the rise, prospective homebuyers in Maricopa County face new challenges in their quest to secure a home, let alone their dream home. In this article we will discuss the implications of these changes and adopting effective strategies for navigating this evolving landscape successfully.

Current Interest Rate Trends:

In recent times, the Phoenix area has experienced notable fluctuations in interest rates. Economic factors and the Federal Reserve’s policy decisions have contributed to this volatility. As of the date of this publication, the average interest rate for a 30-year Conventional mortgage ranges from 6.25% to 7.30% at par, with variations in that range based on the individual’s credit score and down payment amount.

Impact on Affordability:

Even a slight increase in interest rates can significantly impact monthly mortgage payments. For instance, a 0.25% hike on a $450,000 mortgage, with 10% down, can mean an extra $69 per month, totaling $828 annually over the loan term.

Strategies for Homebuyers:

10 ways you can combat increasing mortgage interest rates

  • Start Early and Save Aggressively: Begin your homebuying journey early and save aggressively to build a larger down payment.
  • Improve Your Credit Score: Pay bills on time and reduce credit card balances to improve creditworthiness.
  • Explore Loan Options: Consider alternative loan options such as Buy-Downs, Adjustable-Rate Mortgages (ARMs) or Seller Financing.
  • Shop Around for Lenders: Compare interest rates, closing costs, and terms from different lenders to find the best offer. Request a Good Faith Estimate from your mortgage contact so you have the terms to compare in writing.
  • Consider Smaller Homes or Different Areas: Be flexible with housing preferences and explore up-and-coming neighborhoods.
  • Lock in Your Rate: When you find a favorable interest rate, consider locking it in to protect against future increases.
  • Pay Points (Discount Points): Evaluate the option of paying points upfront to reduce the interest rate.
  • Budget for Rising Costs: Anticipate higher monthly payments and factor them into your budget.
  • Investigate Down Payment Assistance Programs: Explore available assistance programs for first-time buyers.
  • Be Patient and Informed: Stay informed about market trends and seek guidance from professionals.

Market Outlook & Future Considerations:

Recent Trends: The Phoenix housing market has undergone dynamic shifts, with homes currently selling at higher prices compared to previous years. Despite increased days on the market since the pandemic’s onset, homes priced competitively still attract multiple offers, especially in the starter price points and for properties with unique amenities and features.

Future Predictions: While home prices are projected to continue rising in Maricopa County due to inventory shortages, steep double-digit growth is unlikely. Economic indicators like employment rates, inflation and GDP growth along with crime and the Federal Reserve’s policy decisions will continue to have major impact on future housing trends. But despite rising mortgage rates, Phoenix remains the top city for home building in Maricopa County. New construction is trying to alleviate supply constraints, but has a long way to go. New construction will continue to be popular option for buyers, if they have the luxury of waiting on average 10 months, due to the lower interest rates builder’s in-house lenders offer.

Affordability Concerns: Affordability in Phoenix has declined due to rising home prices, rental costs and the overall cost of living increasing due to inflation. Understanding these challenges is essential for prospective buyers. Property taxes and homeowner’s insurance continue to increase yearly for the Phoenix Metro area, and is something you should consider when looking at your monthly expenses.

In closing it’s important to be proactive and informed in navigating rising interest rates as a homebuyer in any area of interest, not just Phoenix. Whether you are a first-time homebuyer, or seasoned with the process, it’s a good idea to seek guidance from financial professionals and explore their options thoroughly to make informed decisions in this evolving market. Erica Anderson of Real Premier Team can be a wealth of knowledge as you explore loan and home options. Contact her to discuss your situation for buying your next home and hear how she and her team can help.

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