Inflation is the highest we have seen in 40 years. That has been the story for the last few months in the U.S. Families paying more for everyday items to live. With inflation comes the Federal Reserve’s action to bring it down, which means interest rates continue to rise.
As the central bank tries to cool inflation, the increasing rates are affecting future homeowners.
Nearly 15% of all home contracts fell through in June. That is the highest we have seen since March 2020, the start of the pandemic, according to real estate brokerage Redfin.
Many buyers are walking away because they didn’t lock their mortgage rates before they started to rise. Some potential buyers are getting priced out because their debt-to-income ratio numbers mean they can’t afford the home they have been trying to buy for months.
Cliff Freeman, real estate expert of the Prosper-based Cliff Freeman Group, says North Texas is a hot place for these deals to fall through and says most of these busted deals are coming from new builds.
“What’s happened in the last seven months is that we have seen people who are buying houses at $300,000, now only able to afford homes that are 20% less. Some down to $240,000,” Freeman said.
NBC 5 asked Freeman some common questions about the housing market right now, specifically here in North Texas:
As the housing market cools down and prices rise, do you think we are headed for a housing crisis as we saw in 2008?
“I don’t think that we are. There is an inflection in the market. There is definitely a shift, but this shift is not going to be catastrophic like when we had seven million foreclosures in the Great Recession,” Freeman said.
What do you say to someone who says they don’t think they can afford to be a homeowner?
“I say you really can’t afford to rent. Get with a lending professional. They will tell you how much you can afford with the current [mortgage] rates. If a buyer sees something in their price range and they like it, I say put something on it now. Lock the rate now, because they are likely to continue to rise,” Freeman said.
Are rates manageable right now for people who want to get into the market?
“I’ve been doing this for 35 years. I need people to understand that rates are still relatively low. We just got spoiled. I have seen them go up around 13% and 14% in my time. If you can afford to get in the market now, do it. Renting is just paying the landlord and you get nothing in the end. Listen, I like to remind people that you are marrying the house but potentially dating the rate. Yes, you’re going to want the house for as long as you need it, but the rate you start with today may not be the one that you have in three years. There’s a thing called refinancing that is a great tool.” Freeman said.