Buying a Home in Hampton Roads Amid Rising Mortgage Rates

NORFOLK, Va. — Mortgage rates are the highest in years as the Federal Reserve tries to cool the economy and rein in high inflation.

Recently, Freddie Mac, a public finance companypublished the results of its Primary Mortgage Market Surveyshowing that the 30-year Fixed Rate Mortgage (FRM) averaged 6.02%.

Freddie Mac

Steven Hargrow, owner and principal broker of SLH Real Estate said buyers are now settling for smaller homes, despite the same monthly payment, and sellers are waiting longer for their property to leave the market.

“Let’s say the house cost $550,000 and the rate was 2.5%, your mortgage was maybe $2,500. Now, for $2,500, you’re looking at a house that’s around $300,000,” Hargrow said. “With the recent rise in interest rates, [we] noticed that the [number] buyers looking to buy has declined.”

Economists like Bob McNab of Old Dominion University have said it’s because people’s money just doesn’t go that far.

“Buyers become [choosier] and, moreover, they cannot afford the same house that they could have afforded 24 months ago,” he said.

News 3 Problem Solver Erin Miller asked McNab to provide an example.

He said that at a fixed rate of around 3%, as we saw a few months ago, you would pay around $1,300 for principal and interest. Now, with rates between 6% and 7%, you’ll probably pay around $1,900. Ultimately, buyers will end up paying $600 or more every month.

“Not only do they need to put money aside for principal and interest, taxes and insurance, but they also need to have an emergency fund in case the air conditioner or water heater breaks down,” McNab said.

McNab predicts rates could climb to 7% by the end of the year, before falling in 2023 and 2024.

Even still, Hargrow said, “It’s all down to the customers so far, yes, the rates are higher, but the houses are still there.”

If you shop around, economists suggest getting pre-qualified as a way to get a lower rate. Refinancing is also an option for people who want to buy now and adjust their payments later.

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