PHOENIX – It’s been exactly two weeks since the fed funds rate hike, which doesn’t directly raise mortgage rates, but is certainly having an impact, including in Arizona.
With mortgage rates rising and house prices soaring over the past year in Phoenix, experts say the real estate market is on track to catch up with other major cities like Seattle and San Diego.
Before 2022, they say the market was undervalued, so house prices are finally catching up.
Julia Foley has been a real estate agent in the Phoenix area since 2007. Over the past year, she says she has seen a dramatic change. “It’s been a wild ride this past year,” she said.
An average of 30-40 offers per property and cash buyers still make up a large percentage of them.
“They push away people who fund, which makes it more difficult,” she explained.
It affects almost all types of buyers.
“It’s very difficult for first-time buyers at this stage because they don’t have the equity to trade in, and even for people who have the equity they’ve acquired in their current home, when they sell it, it’s hard for them to find a new property,” Foley said.
This is something Tanisha Caglin knows only too well.
“Ideally we would like to buy a bigger place, but if we sell this, where we have equity, the question is simply, where do we go? Because the prices are astronomical,” she said.
In response to the federal rate hike two weeks ago, lenders at all levels are raising their rates.
“It’s just ridiculous. We made an offer on a house and already the interest rate has gone up…” Caglin said.
Buyers have seen rates rise from around 4% to almost 5% in recent weeks. On a $400,000 loan, that works out to an additional $4,000 a year in interest.
All of this has shoppers like Tanisha wondering if it’s worth it.
“Are we going to give up our lower rate here to go to a newer house? I don’t know,” she said.
Combined with a drastic rise in house prices in a hot market, experts don’t think that will slow down anytime soon.
“Phoenix offers so much and people are really drawn to it, so I think the prices are going to keep going up,” Foley said.
Six more rate hikes are expected within the year from the Fed, which experts say will likely keep pushing mortgage rates even higher.
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