2022 Boise Idaho Real Estate Blog

What Do Rising Mortgage Rates Mean for the Real Estate Market?

Main Treasure Valley Life

On March 4, 2021, Freddie Mac announced that interest rates have risen above 3% for the first time since July 2020. This has many buyers, lenders, and agents worried that it will bring a halt to the current real estate market. However, there are multiple reasons why this can actually be beneficial to buyers and shouldn’t be a surprise.

Many people out there are concerned that rising interest rates will be detrimental to the current real estate market now that mortgage rates are above 3% (3.02% at publishing time). However, this means that mortgage rates are still only at 3%. Before the shutdowns last March, mortgage rates sat at around 3.36%. Freddie Mac said this about the mortgage rate increase:

“While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic. However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”

In addition, it is worth noting what mortgage rates were at this time in the last few years. Before the pandemic, the Boise and national real estate markets were healthy and on the rise.

  • 2016: 3.65%
  • 2017: 3.99%
  • 2018: 4.54%
  • 2019: 3.94%

To put it further perspective, today’s mortgage rates are unbelievably low compared to the last few decades. Take a look at this chart;

Source: Freddie Mac

Mortgage rates have fallen steadily since their peak at 18.39% in 1981. Even if the mortgage rates get to or above pre-pandemic levels, the rate you get will still be historically cheap. Just not 2.65% cheap, but we will likely never see rates that low again barring something that impacts the entire globe so quickly. Fingers crossed that doesn't happen again.

What how will rising rates impact homebuyer behavior?

Everything we are seeing, both around the country and in Idaho, is that the spring and summer buying seasons will be strong like Freddie Mac said. In spite of rising rates, buyer demand in Boise and Idaho at large has not slowed, and supply is still at historic lows. Throughout 2020, mortgage rates continually found new rock bottoms, which raised every homebuyer’s buying power, dropping from 3.25% to 2.75% can give a buyer an extra $23,250 in purchasing power. That can be combined with Federal Finance Finance Agency recently the mortgage borrowing limit from $510,400 to $548,250 last week. We don’t see buyer activity taking a drastic turn and home values certainly won’t fall in the Boise area. We predict that the market will have a strong showing in spring and summer, which is typically the time of year with the most home buying and selling activity. If anything, rising rates will cause a slight shift in the real estate supply and demand curve as more sellers feel comfortable listing their homes, buying activity remains strong, COVID-19 vaccinations increase, and buyers getting more money from the federal stimulus and recovering from job loss.

What we will be keeping an eye on are the levels of affordable homes for first-time homebuyers and the availability of new home building lots.

If you are a buyer or thinking about selling your home to capitalize on equity gains and to upgrade your living situation, don't be discouraged that you didn’t get the sub-3% mortgage rates. Rates are still incredibly low. Talk to a real estate agent to get started on your real estate journey and get locked in at the lowest rate possible before they go up further.

Posted by AndrewS at 3/10/2021 5:18:00 AM

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