Mortgage Rates Rising at Twice the Rate of Home Prices Nationwide

Posted by West + Main Homes on Friday, November 2nd, 2018 at 10:54am.

 

Homebuyers might not want to wait to invest in Colorado property.

While there have been signs recently that the market may be shifting toward the favor of home buyers, prices are still on the rise in many areas around the country. The median sales price in July was $230,411, up 5.8 percent year over year.

But if you are a future homebuyer hoping to wait it out, you might want to note that mortgage rates are also increasing. The typical mortgage payment jumped 13.1 percent over that same one-year period, due to a nearly 0.6 percentage point increase in mortgage rates, according to new data from CoreLogic, a real estate research firm.

Mortgage rates are expected to keep rising, too. CoreLogic researchers predict a nearly 10 percent increase in buyers’ mortgage payments by next July, twice the rate expected for home prices. Rates are expected to increase by about 0.43 percentage points between July 2018 and July 2019. Housing forecasters predict median home sale prices to continue to rise by 1.8 percent in real terms over that same period.

Based on these projections, CoreLogic researchers predict the inflation-adjusted typical monthly mortgage payment to rise from $937 in July 2018 to $1,003 by July 2019. Furthermore, real disposable income is expected to increase by only around 2.5 percent over the next year. That means “home buyers would see a larger chunk of their incomes devoted to mortgage payments,” CoreLogic researchers note.

To calculate the typical mortgage payment, CoreLogic researchers use Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment (not factoring in taxes or insurance). The typical mortgage payment standard is used to help judge affordability since it shows the monthly amount a borrower would have to qualify for to get a mortgage to purchase a median-priced U.S. home.

Nevertheless, while mortgage payments are on the rise, they’re still low by historical standards, CoreLogic researchers note. In July 2018, the typical inflation-adjusted mortgage payment still remained 26.8 percent below the all-time peak of $1,280 in July 2006. The average mortgage rate in June 2006 was 6.7 percent compared to 4.5 percent in July 2018.

So what does this all mean for you if you are thinking about making a move anytime soon? It depends. If you are hoping to invest in Colorado Real Estate, it might be better to buy sooner rather than later. With inventory still at almost record lows, it will take a lot of shift in the marketplace before we can even hope to see a true “Buyer’s Market.” No one knows what will happen with interest rates in the meantime, but with every rate increase, your purchasing power will go down and your monthly mortgage payment will go up.

Want to talk through some of the different scenarios? Contact us, and a knowledgable and experienced West + Main agent will be happy to follow up with the most current information for your situation.

Source: “Homebuyers’ ‘Typical Mortgage Payment’ Rising at Twice the Rate of Prices,” CoreLogic Insights Blog (Oct. 17, 2018)

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