The tides seemed to have turned on homebuyers heading into the third quarter of the year. Homes across the country are selling quickly, and they are selling at or near their asking price. To make matters worse for homebuyers, interest rates are on the upswing and are unlikely to head down to the record lows we saw at the beginning of the year.
Holden Lewis, assistant managing editor, Bankrate.com
"Yes, it makes it more expensive to buy a house. But, it's an impetus to actually take action and buy a house. So, when you look at it from that perspective, maybe rising rates and prices aren't so bad."
If you are in the market for a home, gone are the days where you could make a lowball offer and wait for the seller to cave. In certain parts of the country, you may even find yourself in a bidding war. It's not an entirely grim outlook for homebuyers, however. Home prices haven't come near where they were during the height of the housing boom, and while you might not be able to find that 3 percent interest rate, 4 percent is still a value comparatively.
"Let's talk, say, 2004 and 2005. I looked at the numbers. The average mortgage rate over those two years was 5.9 percent. There were a lot of times when the mortgage rate was above 6.25 percent. Now you're looking at mortgage rates of 4.5 percent. And you're looking at house prices that in some markets are lower, still lower than they were during the housing boom. And so when you look at it from that perspective, you have lower rates than during the housing boom, and in some markets you have lower house prices, this is a really good time to buy."
Higher rates mean that adjustable-rate mortgages will gain appeal in the coming months. ARMs generally have lower starting rates than the traditional 30-year fixed-rate loan, so a 10-year ARM could be a good idea for a starter home, but make sure you plan to be clear of the payments by the time it becomes adjustable.
Finally, if you're considering refinancing, your window is closing. It's expected that rates will continue to rise, so if you're still saddled with a 6 or 7 percent interest rate, act fast. For more summer housing trends or to shop around for the best rates in your area, visit Bankrate.com. I'm Lucas Wysocki.