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Many wonder how rising interest rates will impact the Magic Valley housing market

In the Magic Valley, the housing market has been exploding since COVID. Western Magic Valley Realtor president Lisa Haney said last year the median price for a
Published: Jun. 17, 2022 at 6:43 AM MDT
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TWIN FALLS, Idaho (KMVT/KSVT) — Some people here in the Magic Valley are wondering how the local housing market is going to be impacted by the Federal Reserve raising interest rates. They increased rates by three-quarters of a percentage point this week to battle inflation. The largest increase since 1994.

In the Magic Valley, the housing market has been exploding since COVID. Western Magic Valley Realtor president Lisa Haney said last year the median price for a home in the Magic Valley was just under $300,000. It is now around $380,000.

“It has just snowballed, and we are finally cooling down. The market is finally slowing down. We are catching up with inventory,” Haney said.

She added that increased interest rates have also caused the housing market to cool down. The federal reserve has been increasing rates since March.

“The average rate on a 30-year fixed mortgage is about 5.75%, and in contrast about a year ago the rates were about 2.98%,” said Michael Traveller, CFO of 1st Federal Savings Bank in Twin Falls.

Additionally, he said the increased interest rates are impacting homeowners looking to refinance and first-time homebuyers. The mortgage payment on a roughly $380,000 home has gone up significantly.

“So on that loan size is $640 a month more, so it is rather dramatic for the consumer. That is gas money, that is grocery money, " Traveller said.

University of Idaho associate professor Steven Peterson said consumers should be aware that the previous interest rates which were around 3% and lower were historically low.

“Rates in the 1970′s on average exceeded 10 percent so we are a long way from that.”

According to the Federal Reserve Bank of St. Louis in 1981 the rate on a 30-year fixed mortgage on October 9, 1981, was 18.63% Peterson thinks mortgage rates today could get as high as 7% in the near future.

“They call this the great disinflation of the housing market and that is clearly underway,” Peterson said.

Haney adds she hopes home prices are lower by this time next year in the Magic Valley.

“We just keep can’t going at this rate because over the last 24 months the average sold price has gone up 66%, and we just can’t continue with that,” Haney said.

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