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Mortgage Rates Near 4% for Boston Beacon Hill condos for sale in 2022.

Beacon Hill condos and rising interest rates

rates feb 4

Sellers should expedite their moving plans…..

The big monthly jobs report is something that typically matters a great deal to Boston Beacon Hill condo interest rates.

Oddly enough, today’s jobs report was NOT seen having much of an impact for a few reasons.  First off, analysts expected a much weaker number due to Omicron’s likely impact.  Moreover, the Fed is almost exclusively focused on inflation right now as opposed to the labor market (employment and prices are the 2 key parts of the Fed’s job description).  In short, no matter what today’s jobs numbers turned out to be, they weren’t likely to impact the market’s view of the Fed’s reaction.

All of that is now out the window, sort of.  Although there are several important caveats regarding major seasonal adjustments, the jobs numbers were so much higher than the average forecast that markets were forced to respond.  Fed rate hike expectations increased briskly and bond yields surged to their highest levels in more than 2 years.

If we disregard the once-in-a-lifetime volatility seen in March 2020 (and we absolutely should), today’s mortgage rates are now in line with the highs seen in October 2019.  The average lender is now quoting conventional 30yr fixed rates in the 3.75-3.875% neighborhood.  That’s a full eighth of a point higher than yesterday, and more than a full percentage point higher than the lowest rates in August 2021.  Many less than perfect loan scenarios will see rates over 4%.

https://www.mortgagenewsdaily.com/markets/mortgage-rates-02042022

Beacon Hill condos and rising interest rates

A reader on the Boston real estate blog wondered how rising rates will affect the 2022 Boston condo for sale market

Here’s what is expected today:

Under Chair Jerome Powell, the Federal Reserve is poised this week to execute a sharp turn toward tighter interest-rate policies with inflation accelerating and unemployment falling faster than expected.

The Fed today will likely announce that it will reduce its monthly bond purchases at twice the rate that Powell had outlined just six weeks ago. Those bond purchases are intended to lower longer-term rates, so winding them down more quickly — likely by early spring — will lessen some of the economic aid the Fed supplied after the pandemic erupted last year.

Fed officials are also expected to forecast that they will raise their benchmark short-term rate, which has been pegged near zero since March 2020, two or three times next year. Rate hikes would, in turn, increase a wide range of borrowing costs, including for mortgages, credit cards and some business loans. Just three months ago, the Fed had penciled in barely one rate increase in 2022.

Let’s note where the mortgage rates are today:

rates dec 14

Some of the Fed hike might already be priced in, but these rates are still very attractive.  I think that any rate starting with a 3 will be attractive to buyers.

Predictions for the Boston condo for sale 2022 market

But let’s consider the history. Any time rates threaten to go up, or actually do start to rise, it causes Boson condo buyers to hurry up and find a Boston Back Bay condo or Beacon Hill condominium – just to be able to lock in a lower rate. It could means that we could be heading for an early 2022 Boson condo for sale spring market where rising rates actually will create more individuals looing to buy a Boston condo for sale sooner than latter

Conflict of Boston condo buyers and sellers

Boston Beacon Hill apartment renters who are now buyers may think sellers should lower their price to compensate for higher rates will be in for a long wait.  Sellers won’t believe it, and unless they are desperate (which very few are), they will blame the market/rates/agent before considering a lower price.  Many will try over and over again, and it might take them 2-3 selling seasons before they succumb.

Boston condos for sale and the bottom line

Would rising rates cause more Boston sellers to list their condominium for sale? Doubtful, but I hope so! It would be great just to get back to normal inventory (which is about double where it has been during the last half of 2021).

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Mortgage interest rates have already risen by over a quarter of a percentage point  since the beginning of 2018. Many are projecting that rates could increase to 5% by the end of the year.

What impact will rising rates on the Beacon Hill condo market?

Many quickly jump to the conclusion that an increase in mortgage rates will have a detrimental impact on Beacon Hill condo prices as fewer buyers will be able to qualify for a loan. This seems logical; if there is less demand for Beacon Hill condos then prices will drop.

However, in a good economy, rising mortgage rates increase demand as many prospective purchasers immediately jump off the fence to guarantee they get the lower rate. Before the rates rise even higher. In other words, contrary to what you might think, I see this as good news for Beacon Hill condo sellers.

Let’s look at Boston condo prices the last four times mortgage rates increased dramatically.

Boston Beacon Hill condos

Beacon Hill condos

In each case, Boston condo prices APPRECIATED and did not depreciate. I’m not projecting as dramatic an increase in rates as the examples above. Most real estate experts are projecting an increase of approximately 1% by the end of the year.

The last time mortgage rates increased by 1% over a twelve-month period was January 2013 (3.41%) to January 2014 (4.43%). What happened to Boston condo prices during that span? They appreciated by 9.8%.

Just two weeks ago, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting explained:

“Mortgage rates have risen 1% or more ten times in the last 43 years, with little impact on home sales and prices when the economy was also strong…Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates.”

Bottom Line

When mortgage rates increase, history has shown that prices appreciate (and do not depreciate) during that same time span. If you are thinking of selling your Boston Beacon Hill condo, please give me a call or visit me real estate office at 137 Charles Street.

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MLS PIN data last updated at May 22, 2022 12:28 PM ET

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