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For the first time since April 2002, mortgage rates have risen to over 7 percent, currently 7.08 percent compared to 6.94 percent last week. One year ago, mortgage rates were 3.19 percent.
This is a 56 percent increase in the monthly payment for the same amount borrowed in October 2021.
In 2002, a median single-family house in California cost $317,000; today it’s $822,000.
As the U.S. Federal Reserve continues to raise short-term interest rates in an effort to get inflation under control, it is expected that mortgage rates will follow suit, as they typically do.
Using median list prices for September 2022 as compared with September 2021, buyers this year are paying almost 80 percent more for the same house!
Of course, this is pricing more and more would-be homebuyers out of the housing market.
The good news is that prices have come down slightly in many markets.
Home prices in August were down 6 percent from June, the biggest drop in nearly ten years. Meanwhile, the number of homes sold declined for the 7th straight month.
Mortgage rates continue to rise as the Federal Reserve increases interest rates at an almost unprecedented rate in an effort to fight inflation.
Analysts worry that such rapid increases could push the country into a recession which would further deflate home prices.
After their late September meeting, the Federal Reserve announced that “a moderation in the pace of asset purchases may soon be warranted.” During the pandemic, the Fed has been buying up billions of dollars in mortgage debt, thus keeping mortgage rates very low.
Analysts expect the Fed to gradually cut back on their purchases, possibly as early as November. Many predict rates will continue to rise into Spring 2022.
According to Berkshire Hathaway HomeServices’ latest Homeowner Sentiment Survey 60 percent of those surveyed maintain confidence in the U.S. economy while 70 percent view the real estate market favorably.
On the other hand, a growing number of potential homebuyers – particularly millennials – are discouraged by rising mortgage rates and say that it may prevent them from buying a home.
Current rates are still low by historical standards – 4.02 percent for a 30-year fixed loan as of May 18, but 68 percent of millennials feel a growing sense of urgency to purchase a home as they believe that interest rates will continue to increase.
Now that “Brexit” is an historical fact, many analysts see the possibility for interest rates to sink to record lows in the coming weeks. Currently 30-year fixed-rates on home loans are near 3.7 percent. While there may be a brief dip soon, some experts predict rates will continue the upward trend to near 4 percent by the year’s end.
Other analysts argue that the Britain’s exit from the European Union may have a longer-term impact on Treasury rates.
Either way, homeowners interested in refinancing will see “Brexit” as beneficial to their efforts, at least in ther short-term.
In the “Did You Know?” department, when applying for a home loan, lenders are generally required to price applications based on the lower FICO score, not the higher. This “minimum FICO” rule is used by lenders and major investors such as Fannie Mae and Freddie Mac.
Research has shown that nearly 10 percent of prime borrowers who applied for loads jointly could have lowered their interest rate by one-eighth of one percentage point if the loan had been applied for by the applicant with the higher score, assuming, of course, that the income was high enough to qualify for the loan.
Experts agree that many couples feel a psychological need to have both names on the note, despite the fact that both could be on the legal title without both being on the loan. Also, the partner with the lower score should see an increase on that score as regular payments are made.
Seemingly defying economic logic – if there is such a thing – fixed rates on home loans continued to fall to lowest marks in almost two years. How can this be? Oil prices are very low but the economy appears relatively strong with almost three million jobs added in 2014, the most since 1999 and unemployment rates have dropped to 5.6 percent.
According to many experts (!), many of the factors holding rates down are international as the economies in many European countries and Russia remain weak.
Low oil prices, low mortgage rates, rising employment – enjoy it because the one certainty is that change will come.
As of December 23, 2014 mortgage rates for a 30-year fixed load stood at 3.735 while a 15-year fixed loan was 2.96% and a 5-1 ARM was at a 2.85% rate.
For 2015 many analysts are predicting that lending requirements will be more relaxed which should result in an increase in first-time buyers. Fannie Mae and Freddie mac are expected to ease down payment requirements to 3% which should enable more young people to buy their first home. According to the Mortgage Bankers Association, sales of new homes in 2015 may rise by as much as 13% while sales of existing homes may increase by 5%.
Finally, the supply of homes is should increase with the result that housing will be more affordable in the Bay Area. Rates are also expected to rise in 2015 although it’s difficult to say exactly when.
According to Freddie Mac, long-term mortgage rates fell this week with the average rate on a 30-year fixed-rate mortgage hitting the lowest level since May 30, 2013. Currently a 30-year fixed rate averages 3.89 percent in the week ending Dec. 4, down from 3.97 percent the previous week. A year ago, 30-year rates averaged 4.46 percent.
A 15-year fix decreased to an average 3.10 percent from 3.17 percent while a one-year adjustable-rate mortgage averaged 2.41 percent this week, down from 2.44 percent.
the National Association of Realtors reported that new home sales in October were short of expectations as pending sales of existing homes fell 1.1 percent in October.
