Have you ever known someone who put in five, ten, or even fifteen offers on different properties but still couldn’t purchase a house? The American dream is often associated with owning a house, having a couple of kids, and watching them play in the front yard – but are we being priced out of this dream?
I’m Marcie Billen, a real estate agent based in Oklahoma City Metro. Lately, the news has been full of stories about climbing interest rates and out-of-control inflation, leading to talk of an impending housing crash. But the news media has a tendency to sensationalize events – so is there any truth to these claims? Is the American dream truly dead?
In any housing market, interest rates are the primary indicator of affordability – not just in the Oklahoma City Metro , but everywhere. In December 2021, interest rates were at 3.1 percent, but by the end of April 2022, they had risen to over 5 percent.
Interest Rates
What does this mean for your purchasing power? Well, it doesn’t affect your down payment, but the interest rate is a big deal – it determines your monthly payment. For example, if you closed on a $300,000 house in the Oklahoma City Metro at 3.1 percent interest with a 10 percent down payment and private mortgage insurance, your monthly payment would be around $1,541 (give or take). However, if you had a loan with an interest rate of over 5 percent, like they were in April of 2022, your monthly payment on a $300,000 loan with a 10 percent down payment and private mortgage insurance would be over $1,800.
As an article by CoreLogic explains, the Fed raises interest rates to try to cool off the rising house prices in the market. But who does that affect the most? Why do rates go up so quickly? The Fed also raises rates to combat inflation, and there is now a correlation between interest rates and inflation. While I’m not completely convinced that inflation and interest rates should be correlated in this way, that’s just my opinion. I’d love to hear yours – drop it in the comments.
Realistically, home loan interest rates below 3% are not sustainable for our economy or the banks that are charging them. Those low interest rates were pushes home prices higher and higher, which can be hard to slow, let alone reverse when there’s such high demand + a large buyer pool looking for homes. It takes a while for the real estate market to catch up when there’s an adjustment in the economy.
Don’t forget to check out our OKC Relocation Guide!
Can We Save the American Dream?
Some of you may have caught the 60 Minutes special that aired at the end of March 2022 where they were interviewing someone from a big corporation who’s been buying a lot of houses, and of course, first-time homebuyers and some realtors. What we’re seeing in the market, not for every single house, but we’re seeing a lot of corporations coming in to outbid homebuyers or owner-occupants who are wanting to live in the house. So, these corporations will come in with large amounts of cash to buy the house completely with cash and not have a loan, and that just feels a lot better to a lot of home sellers. Those corporations then turn around and rent that house out to the same homeowners who are the same prospective homeowners who were wanting to purchase it to live in. So, now we have even more renters in our market than we did before.
We have people in the Oklahoma City Metro that are advocating against these practices of these corporations coming into our neighborhoods and purchasing houses and putting renters in there. So, a lot of people are advocating against these practices. One of these people is a state representative here in Oklahoma named Mickey Dollins. Dollins argues that we have out-of-state investors coming in, driving up rental prices, and of course, prices just to buy the home in the first place. Dollins is running for state representative again in his district and hasn’t really come out, and I don’t think that he’s got anyone running against him but hasn’t come out saying what his platform is going to be that’s going to help the situation with out-of-state corporations purchasing houses. He has called out the Oklahoma state department of tourism for their consistent marketing to West Coast Americans, trying to get them to move to Oklahoma. We love for those people to come to Oklahoma. I have many of you that I’ve helped move from California, Washington state, Oregon, Arizona, that want to move out here to the Oklahoma City Metro, and we love those types of owner-occupants, and if you want to live here, what’s really difficult is seeing these big corporations coming in and purchasing houses within our own neighborhoods so that they can make that money and then take that money out of our state.
In my mind, there has to be a larger plan, and I love that people in our state government are thinking about this. We need to keep Oklahoma in the hands of Oklahomans or in the hands of people who are active in their communities, living there, working there, spending their money there. One thing Dollins did mention in his recent interview with Oklahoma Free Press is some of his ideas or some ideas that other people have come up with to limit out-of-state investment from corporations, and this includes tax structures. I’ve seen people talking to their HOAs about changing verbiage to their covenants to only allow home owners/owner occupants to purchase or require that the purchaser live in the house a certain amount of time before they are able to rent it out. There are lots of different things that we can do at the local and state level to kind of prohibit this practice, de-incentivizing these corporations from purchasing in our states and our communities; raising taxes is something that they’re looking at at the state level in order to bring this kind of investment down, and I really agree with all of this.
Even though I’m a realtor, even though I do and have had people sell to large corporations, most of the time, I see people who are selling their own home, and they don’t want to sell to a large corporation, and that’s something you can do on the seller level. You can ask questions about who’s purchasing the house- that’s up to you.
If you’re interested in learning more about the Oklahoma City Metro, you may want to watch some of my videos or read my blog posts. As a real estate agent in the Oklahoma City metro area, I’m always happy to share my knowledge and insights with people who are considering buying or selling a home in this region. So feel free to reach out to me if you have any questions or if you’re looking for assistance with your real estate needs. Thank you for reading!
Need to get in touch? Call, message or book a call with Marcie today! https://calendly.com/marciebillen
