SIOUX FALLS, S.D. (KELO) —We’re only three weeks into the new year, but Mortgage rates have already gone up roughly half a percent since January 1st—and industry experts expect the upward trend to continue all year. 

“When interest rates go up, it really affects any buyer that’s in the market right now,” Tyler Goff with Hegg Realtors said.

In his more than 15 years in real estate, Tyler Goff has found the home buying process usually takes roughly 90 to 120 days from your first mortgage approval to closing on a house. Prospective home buyers stuck in that window right now are seeing a big impact.

“If they got quoted at a lower rate now for their payment and then in the process that interest rate goes up, well it kind of moves the field goal post a little bit,” Goff said.

“At the first of the year rates were about 3.25 percent now they’ve gone to roughly 3.75,” Plains Commerce Senior Mortgage Banker Kevin Carlson said.

While a half a percent may not seem like much…

“Let’s say a $250,000 loan—around the average home price in this region–it’s going to be roughly a $70/month hike,” Carlson said.

…it makes a big difference on how much house buyers may be able to afford.

“For the same payment, instead of a $250,0000 dollar house, now it’s $235,000 dollar house. So in the last month, people have lost roughly $15,000 worth of buying power for that price range,” Carlson said.

Carlson says the industry is bracing for even more of an impact throughout the year as the Federal Reserve works to combat inflation.

“Ever since the response to covid started, they’ve been intentionally keeping interest rates low,” Carlson said. “Now the Fed is beginning to lift its thumb off that scale, so we’re starting to see the effects of that….and that is not going to stop, it will only intensify. We’re expecting interest rates to continue to rise,” Carlson said.

But even though rates are rising, Carlson says it’s important to keep a perspective on how these rates compare to recent years.

“The rates are ticking up from where they had been, but historically speaking, with the exception of the last few years. These are still the lowest rates we have seen,” Carlson said.

“Really in the last two years, they’ve been at historically low rates that were unheard of before,” Goff said. “So there’s reason to believe that the interest rates will go up this year.”

While the rising rates are adding to the pressure of a housing market that’s already seen a roughly 20 percent increase in home prices over the past year…

“Demand in Sioux Falls is only going to get bigger and bigger,” Goff said.

People in the real estate agency agree say now is still the best time to get into the growing housing market if you want to secure a new home and a low mortgage rate, before prices climb even more.

“As home values rise and as interest rates continue to rise, that will affect affordability on home. The flip side of that is we do see rents rising at astronomical rates as well,” Goff said. “If you’re interested in locking in your monthly payment, buying and using a mortgage to do that is a smart way to lock in what your monthly payment for your housing is.”

That is easier said than done in this competitive real estate market, where Sioux Falls is seeing some of its lowest ever inventory of homes available for sale.

“To people in the market right now, I’d say don’t give up hope. There are people everyday, people are winning bids. Just because we’re expecting interest rates to go higher in the future, the sooner you can get into locking in a mortgage loan, the better,” Carlson said.

While the competition may mean fewer choices, Goff says even in this competitive market, he’s able to get most customers into a home in that same 90 to 120 day time frame he’s always done.