Are Mortgage Rates Going Up? Magic 8 Ball Says “Most Likely”
There are two quotes that came out in the last 30 days that make it seem very likely rates will increase. First was from Doug Duncan, the Chief Economist at Fannie Mae. “I don’t think the Fed ultimately would be troubled with a 6.5 percent mortgage rate.” That’s interesting he would say that. He doesn’t think the Fed would be troubled if interest rates went up to 6.5%. Shortly after Frank Nothaft , Freddie Mac’s Vice President and Chief Economist, said this. “As the economy continues to improve we expect to see continued upward movement in long term interest rates.” “At today’s house prices and income levels mortgage rates would have to be nearly 7% before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.” So we have the chief economist at Fannie Mae and the chief economist at Freddie Mac both agreeing that if interest rates were 6.5-7% it’s no big deal.
What does this mean to buyers? Well let’s look at what happened over the last year. If we projected a ten percent increase in prices and we look at a $200,000 house, it’s now $220,000. Buyers can no longer get a 3.5% mortgage that they could last year, now it’s 4.5%. That means their mortgage payment went from a little less than $900 to over $1100 a month. It’s a $216.62 increase every month because they waited. If you multiply that over 12 months it’s $2600 a year. Over a 30 year mortgage it’s almost $78,000.00 it cost that family because they waited. Now would be a good time to get off the sidelines and buy the home you have been wanting.
What do the higher mortgage rates mean to Sellers? Home prices may be reaching a high for a while, and now could be a good time to sell. What do I mean? If it’s good for buyers to buy, how could it be a good time to sell? Oh, you thought those were mutually exclusive. Not at all. Look at what Freddie Mac’s chief economist said. “At today’s house prices…” Unfortunately as the mortgage rates go up it will temper the increase in home prices we have been experiencing. The mortgages will become less affordable and therefore buyers will qualify for a lesser purchase price. This causes a stabilizing of prices and depending on how high rates get, it could cause a reduction in home prices. So, if you were considering making a move you may want to do that sooner rather than later.
For more information on Market Trends and analysis you can reach me at Kennysellsfast@gmail.com or call me at 951-514-7023
Kenny Duckwald, CHSA, BRE 01199884
Expert Real Estate Advisor
Lakeside Realty, Canyon Lake CA
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