We just moved our clocks ahead an hour, and this weekend is the spring equinox. I love all the season for different reasons, but spring has to be my favorite. The flowers come up, leaves form on the trees and the days get longer. It’s still winter in the mountains, but it’s warm in town and it’s the perfect time for a trip to the desert, before it gets too hot.
Two years ago this week was the start of the “stay at home order” as a result of the COVID-19 pandemic. Within weeks we experienced shortages of items like toilet paper, hand sanitizer, and masks, followed by shortages of lumber, appliances, household goods, cars, and homes. When supply is short and demand is high, inflation occurs.
Over the last 10 years, the rate of inflation in the U.S. has been in the range of 0% to 3%, until April 2021. Since then inflation has soared, hitting 7.9% in February 2022, the highest it’s been since January 1982.
The biggest contributor to inflation has been the increase in the cost of energy, which has increased significantly in the last couple weeks due to the ban of Russian oil imports by the U.S., as a result of the Russian invasion of Ukraine.
According to AAA, the average price of regular unleaded gas in the U.S. is currently at $4.33 per gallon. One month ago it was at $3.84 per gallon, and one year ago it was $2.83.
The U.S. and most of the civilized world stand with Ukraine, as do I, and Ukraine is fighting back. Chances are, this war won’t end quickly and inflation probably won’t go back to sub 3% levels for some time.
With high rates of inflation, come increasing interest rates, and we’re seeing that right now. The graph below, from the Freddie-Mac web site, shows the average interest rates for the 30-year Fixed Rate Mortgage, the 15-year Fixed Rate Mortgage and the 5/1 ARM, during the last year.
The low point over the last year was in August 2021 when the 30-year rate was at 2.8% and the 15-year was at 2.1%. By late December the 30-year rate was at 3.0% and the 15-year was at 2.3%. Right now the 30-year rate is at 3.9% and the 15-year is at 3.1%. So rates just increased by about 1% since the end of 2021, which is a lot more and a lot sooner, than major economists were predicting.
The increased cost of principal and interest on a 30-year mortgage is about 13%, when the rate increases from 3% to 4%. So if you were pre-approved for a loan amount in December 2021 of $500,000, you would now qualify for $440,000.
Stay tuned for next month’s SLC Homes News where I’ll present the first quarter 2022 result for the value of homes and condos in Salt Lake County. From what I’ve been experiencing with my clients, I’m guessing it could be a record breaking first quarter.
If you or someone you know has any questions about buying or selling real estate or if you’re wondering what your home is worth, I’d love to hear from you!
Also keep in mind that I offer professional home staging and photos for sellers as part of the deal, at no extra cost to you. There are various studies you’ll find online that show that homes that are professionally staged and photographed can sell for 5% to 10% or more, than homes that are not professionally staged and photographed.
Thank you for your repeat business and your referrals!!!
Kevin,
