Housing market conditions continue to cool across Volusia, Flagler, St. Johns, and Brevard counties. In September, closed sales per county were down 20%, 39%, 34%, and 16% year-over-year across all property types, respectively.

A similar but less drastic dip emerged in October, with the same counties posting 18%, 14%, 18%, and 22%. While active inventory levels are up significantly year-over-year, rising interest rates have some prospective homebuyers applying the brakes.

Kristin Deaton, Sales Manager and Loan Officer at Guild Mortgage, teamed up with David Zalutko, realtor at Realty Pros Assured, to discuss current market conditions in relation to home loan rate hikes.

The consensus: Temporary pain can still provide a long-term gain for home buyers willing to consider “the big picture.”

Q: What conditions are contributing to home loan rate increases?
A: There are a number of conditions contributing to rate increases like inflation, the Federal Reserve, and economic conditions. When inflation is high, rates are high.

Q: Can you explain what factors determine a person’s rate?
A: There are a number of factors, from credit score, loan-to-value ratio (down payment percentage), and loan type to the kind of home being purchased and occupancy of the subject property.

Q: How does the type of home loan someone pursues impact the rate?
A: Condos, multi-unit, and manufactured homes carry a higher rate (or higher loan points) compared to a single-family home. Purchasing a secondary or investment property also yields a higher rate than a primary residence.

Note: Certain property types can carry higher rates or additional loan level price adjustments due to an increased risk.

Q: What advice do you have for house hunters looking to secure the best rate during these challenging times?
A: Is there really a “best rate” during these challenging times? [In general], credit scores 740 and above with 25% down payment on a conventional loan for a single-family home as a primary residence will yield the best rate in any current market. Plus, temporary buy-down programs, lock and shop, assistance programs, and refinance options are available as well.

Q: Fixed versus adjustable rate: When, if ever, does it make sense to consider an adjustable rate?
A: It depends on current market conditions and how long someone plans to keep the loan. If the adjustable rate is lower – and you will be paying off the loan or refinancing before your rate cap – then yes, an adjustable-rate loan could make sense.

Q: Why do you believe current rate hikes shouldn’t discourage a home purchase?
A: When rates are low, it’s a tougher buyer’s market. Expect more bidding wars and offers above asking. [With rates rising] I suggest buying the house you want, when you can get it, and at a price you can afford. Rates aren’t forever. When they drop, refinance. FHA and VA loans, for example, offer streamline refinances. No appraisal or income documents are required. It’s a very simple process.

Q: How do homeowners go about obtaining a lower rate if/when the market rate drops?
A: It’s an extremely common practice to refinance. A lender can run the numbers to determine how long someone needs to stay in the house in order for the refinance to make [financial] sense. I am happy to help with that! Here at Guild Mortgage, we offer existing and repeat clients a discount on a refinance.

Q: What’s your market prediction – where do you feel the market and rates are heading? What conditions need to happen in order for things to level out? When do you anticipate things will level out?
A: Fannie Mae originally predicted that rates would simmer beginning in early 2023. With inflation rising, however, market predictions have since moved to the end of 2023 and 2024. I personally feel that we will likely see interest rates come down ahead of an election year – and when inflation comes down, rates will follow suit.