SIOUX FALLS, S.D. (KELO) — Dave Kelly doesn’t see Federal Reserve interest rate hikes slowing down the housing market in Sioux Falls.
As the current average 30-year fixed mortgage rate moved past 5% following last week’s Federal Reserve rate hike of 0.5%, Kelly said it’s still important to look at interest rates in a historical context.
Mortgage rates are higher than they’ve been in a decade, but Kelly, a mortgage planner with Fairway Independent Mortgage Corporation, said since the early 1970s the average 30-year fixed rate for mortgage has been closer to numbers above 6%.
“As far as demand, Sioux Falls has very high demand right now,” said Kelly, who noted he had just spoken to someone looking to move to Sioux Falls from Missouri. “Historically speaking, we’re still pretty good on interest rates.”
April 2022 data from the Realtor Association of the Sioux Empire shows demand for houses remains high. The Median Sales Price increased 13% to $266,000 in Sioux Falls and inventory levels are down 36% for previously owned houses compared to April 2021 and new construction was down 51% compared to April 2021.
“It’s still supply and demand,” RASE president Anne Ferrell said. “The fact that interest rates have gone up a bit is not going to keep people from buying homes right now.”
Ferrell said homeowners should understand the value on their homes is high and new buyers should not look for the “dream home” but rather a home that can develop into a “dream home.”
“It is definitely a seller’s market, we do know that,” Ferrell said. “This is definitely a time you want to be working with your realtor, because they have the knowledge and the expertise to work through the challenges that are out there.”
Kelly pointed out whenever the Fed raised interest rates, a recession followed.
“And when you have a recession, mortgage rates always go down,” Kelly said. “If I had to put a crystal ball on it, I would say that in the next 12 to 18 months, we’ll probably see rates going down, I would say that we’re going to plateau, then I think we’re going to head back down.”
Kelly advised people to be careful of what they could read online about mortgage lenders. He said people should find a lender that works with them.
“A lot of times you’re making offers at nights and weekends,” Kelly said. “I know two weeks ago, two of my buyers got homes on Friday nights, because that’s how that works today.”
That’s similar to advice from RASE, finding a realtor that works well with you.
“There’s no magic bullet to predict the market. What I can tell you is the values right now are so high that it is a really good time to let go of your home and sell it if this is the right time for you to be making a shift in life,” Ferrell said. “Yes, it’s competitive, but there are still tremendous opportunities out there.”