Increased prices on houses is putting some buyers out of the market, at the same time interest rates could put a damper on the overheated real estate market.

“All eyes are on the recent surge in mortgage rates, which have reduced the pool of eligible buyers and caused mortgage applications to decline,” said Howard Schaeffer, president of Greater Lehigh Valley Realtors.

Howard said the average interest rate for a 30-year fixed loan exceeded 5% in April. This is the highest level since 2011, according to loan mortgage company Freddie Mac.

The increased interest rates are also slowing the refinance market. The number of applications to refinance is down 70% compared to this time last year, Howard said.

Kristen Obert, a broker and owner of Iron Valley Real Estate Northeast in Palmerton, agreed that the interest rates are going to impact the real estate market.

“The increased rates are reducing a buyer’s purchasing power,” she said. “Many buyers are now having to buy down their rate, which is increasing their closing costs; that coupled with the higher interest rates is increasing the monthly mortgage payments.”

Obert said there is still a steady influx of people from New York City, Philadelphia and New Jersey that are buying houses in the area, but she is concerned that rising prices are pushing local residents out of homeownership.

“There are local buyers, who have been priced out of the market, still waiting to be able to purchase,” she said. “My concern for the real estate market is how to provide affordable housing that is sustainable.”

The housing affordability index for Carbon County was 100 in April. The index measures the affordability of a region. If the index is at 120, for example, it means the median household income is 120% of what is needed to qualify for a median-priced house under prevailing interest rates. A higher number means greater affordability, according to the Realtors group. An index of 100 is the lowest point of affordability before housing prices become too expensive for most people.

The average sales price in Carbon County in April was $214,228, up from $194,919 in April 2021, according to the Realtors group.

Howard said prices are going up in Schuylkill County, too.

“Housing in Tamaqua, for example, would go for $10,000 and now you can’t touch something for less than $80,000,” he said.

The previously low interest rates brought out the buyers, but now the low inventory, supply chain issues affecting construction costs have all played a part in increasing housing costs, the real estate agents said.

Michael McGee, chief executive officer of the Pennsylvania Association of Realtors, said the cost of labor and materials are going up, so the cost of housing and new construction has increased.

“That’s a huge problem that is contributing to the housing affordability issue,” he said.

McGee has also seen a rise in the costs of land development by tens of thousands of dollars over the years.

“That in itself is driving up the lack of affordability,” he said.

McGee said a six-month supply of houses is considered healthy, but Pennsylvania is down to 2.6 months. Inventory is even lower in Carbon County, which is down to just one month, according to the Lehigh Valley Realtors group.

On the flip side, if a person is selling a house, the market can be seen as a boon.

Howard said, “If you put a dot on the map, everyone is largely winning. Carbon County has been experiencing a stellar few years, partly because of what that county has to offer, but also because homebuyers are looking for inventory not available in other contiguous areas.”

When will housing prices come down?

“In my opinion, I think that the market may slow down by the end of the year,” Obert said. “Rising inflation and interest rates will decrease the buyer’s ability to purchase.”

Howard said, “The experts keep telling me 2023, but I don’t see it.”