Over the past two years, housing prices have shot up in Wisconsin and throughout the United States. This is in part due to a lack of supply caused by construction delays due to the pandemic, as well as few people wanting to sell their homes. However, a major reason people have continued buying homes at high prices is because of record low mortgage rates.
The trajectory of the property market during the pandemic has been somewhat unexpected. Many economists assumed that job losses and business closures would have sellers of properties struggling to find buyers. They predicted that property prices would crash.
The fact that the opposite happened may be surprising, but it is somewhat by design. In the early months of the pandemic, the Federal Reserve lowered interest rates in the hope of stimulating growth in a decimated economy. The property market’s recovery and the subsequent surge in value is largely due to this (and other) steps.
For someone looking to buy a home in Wisconsin, this presents a dilemma. Wisconsin homes are extremely expensive right now, but mortgage rates are as low as they are going to be for the foreseeable future. Should they rush into buying a home in case mortgage rates shoot up?
Mortgage Rates in 2022
If you compare the best mortgage rates, you will see that the rate on a 30-year mortgage is currently close to 3.75%. This is low, but it is far higher than the 2.65% record low at the start of 2021. This makes sense in the current economic context.
In December 2021, inflation was 7% higher than a year earlier. This is the biggest rise in inflation since 1982. One of the measures the Federal Reserve is likely to take to halt the rising cost of living is raising interest rates.
In October 2021, the Mortgage Bankers Association predicted that mortgage rates would reach 4% by the end of 2022. Now we already seem to be heading towards that 4%, and the reality is that the rates could rise significantly higher.
So, as a potential buyer in Wisconsin, should you take advantage of low rates?
At the start of 2020, the average price of a home in Wisconsin was $198,000. By the end of 2021, the average price had reached $244,000. Housing prices have been climbing steadily and don’t look like they are about to stop.
If you’re looking to take advantage of the low interest rates, you will have to accept that your home is going to be expensive nonetheless. You’re going to pay far more for far less, regardless of the mortgage rates.
You may be willing to do so, based on the expectation that the value of your home will continue to rise. However, that is not guaranteed. With rising mortgage rates, it is possible that property values will start to plateau, if not drop. The property market is unpredictable at the best of times, but there is reason to show caution as things stand.
Mortgage rates will continue to rise, but it is unclear whether Wisconsin property will do the same. By buying a home now, you can take advantage of the low rates. It is up to you to decide whether it is worth risking buying high-value property to get these rates.