CLEVELAND — The Federal Reserve raised interest rates for the sixth time this year. It’s all in an effort to curb inflation, but this makes interest payments on things like buying a house, credit card debt and cars much higher.
So, what’s going on in the housing market in Northeast Ohio? News 5 sat down to pick the brains of two experts in the field.
History tends to repeat itself, but the housing market’s explosion out of the pandemic was like nothing we’ve ever seen before.
Alex Johnson, a mortgage banker with Union Capital Mortgage, said the mortgage and housing industry was on fire, characterized by record high home prices and low inventory.
“I would say a little after COVID hit and then probably the two years post-COVID, we were pretty, pretty spoiled in the industry,” he said.
Allie Carr is a realtor at Berkshire Hathaway and echoed his sentiment.
“Every single house that hit the market would sell within a day or 2 and overusing,” she said.
But with the sixth federal interest rate hike, the leaves of change are here.
“In my career I’ve never seen a strong change in the market for the first half of the year to the second half of the year,” said Carr.
The Fed’s hope in the interest rate hike is that it will lead to a rise in mortgage rates and a more balanced housing market, and overall economy.
Carr said, in comparison to last year, they’ve begun to see the impact of the hikes.
“Right now, while it has slowed down and buyers have a lot more negotiating power than they had earlier this year it’s still a strong time to sell for sellers, as well,” she said. “Houses are still selling in Cuyahoga County on average in less than 30 days right now, it’s averaging 25 days.”
Johnson said the hikes mean people aren’t refinancing.
“They're not going to want to refinance. The people that, maybe, were looking to sell within a year or two might not do so because they don't want to leave their 2% or 3% fixed interest rates to go to a 5, 6 or even 7,” he said.
But people still are buying, many lowering their price points trying to counteract the higher rates, so mortgage payments don’t break the bank. He also suggests if you are looking to buy, to refinance when rates drop.
“Just because you’re not going to get as much house right now, because the cost to borrow is a little more, it doesn’t mean that it’s not still a good investment,” he said. “It’s a great one.”
Carr said many buyers are working with sellers and realtors are being flexible.
And as far as how long it may take to get back to pre-pandemic norms, well Michael Goldberg, a professor with Case Western Reserve University said only time will tell.
“I think the question of how long this is going to last, in particular, as we head into elections next week is on everybody's mind, but it’s not clear,” said Goldberg. “This could be a long winter for us in many ways, but I think the hope is, is that interventions like today by the Fed to try to fight inflation, as tough as it is in terms of the impact of higher interest rates, that you will see us coming out of this in the upcoming months ahead.”
