AUSTIN, Texas — The Federal Reserve is raising interest rates to combat inflation, but Austin Realtors said they do not see rising mortgage rates slowing down the booming housing market.
Austin-area homebuyers are urged to stay cautious. Experts predict homebuyers will be facing low housing inventory, high demand and inflation in the city and now rising mortgage rates.
"Back in January of 2022, I was having lenders still close loans in mid 3.5%, 3.7%, no problem," said Rivett Real Estate owner Rosie Hayer.
Hayer said those historically low mortgage rates are, well, history. New numbers show that as of Monday, the average rate for a 30-year fixed mortgage is 5.25%. That marks a jump from 4.55% this time last month.
McMahon expects rates to continue to rise. The federal reserve announced plans to increase interest rates six times this year to slow the economy and battle inflation.
"So, interest rates going up is killing the affordability for homebuyers," said Hayer.
Hayer said for every 1% increase in interest rate, buyers lose 11% of their buying power.
"If a buyer is half-a-million buyer, like $500,000 home, they cannot buy any more than mid-400s now to maintain the same monthly payment and budget," said Hayer.
A higher mortgage means less wiggle room in bidding wars that McMahon said haven't slowed down much.
"We're still seeing 10 multiple offers in that range," McMahon.
McMahon said homes have gone from sitting on the market for a weekend to a week, which is still historic compared to the usual three weeks to 30 days pre-pandemic.
Neither Realtor sees rising mortgage rates affecting the booming Austin housing market.
"The supply is so tight that even if mortgage rates are going up and down, 30% of the buyers in the market last year were cash," said Hayer.
This means they most likely didn't need a mortgage.
Both Realtors advise buyers not to fight alone and find a Realtor or a broker to stand in your corner.
"There's a lot of different products other than just a conventional mortgage out there that if you're working with a good adviser, they can show you different ways to get the same thing accomplished," said McMahon.
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