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Where are home prices and mortgage rates headed?

The United States' current inflation rate now stands at 9.1%.  One of the Fed's answers to curb inflation is to raise interest rates.  While mortgage rates aren't directly tied to Federal interest rates, the Fed has an impact on mortgage rates, along with other important factors.  The Fed is trying to slow an inflation rate not seen since the early 1980's.  The following chart shows historical inflation rates over the past 100 years:

As inflation has climbed over the past year, so have mortgage rates.  The last time that inflation was this high, mortgage rates were over 12%.  While we don't expect to see rates go that high in the immediate future, history does tend to repeat itself and we expect rates to continue to climb over the next year.

What exactly do rising interest rates mean for consumers?  The chart below is a breakdown of value for 30 year mortgages by year (principal + interest) at a total payout of $500,000.  As you can see, A $344,200 mortgage from this past December now cost the same as a $251,236 mortgage.  This is going to have a direct impact on slowing home appreciation.

Bottom Line: Mortgages are much less affordable than they were just a few months ago.  Are you a buyer or seller in today's Maine real estate market?  Call us today for a free real estate consultation at 207-890-1361 to discuss your options.

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