14 Jan The Future of Mortgage Rates and Home Prices
Experts are chiming in on the outlook of how mortgage rates and pricing could change shortly. After a historic year for the mortgage industry and high demand, a positive outlook for 2022 real estate remains. There are many factors to consider, and as Money.com says, expect the unexpected.
As the economy begins to strengthen and as normalized activity hits the market, expect to see borrowing costs and home prices grow. Fortunately, these increases will be more modest and at a much slower pace than experienced in 2020.
Mortgage Rates Looking to Rise in the Fall
Mortgage rates slipped back after having been on the rise for just the 2nd time in 7-weeks in the previous week.
In the week ending 19th August, 30-year fixed rates fell by 1 basis point to 2.86%. Mortgage rates had jumped by 10 basis points in the week prior.
30-year mortgage rates have risen just once beyond the 3% mark Since 21st April.
Compared to this time last year, 30-year fixed rates were down by 13 basis points.
30-year fixed rates were still down by 208 basis points since November 2018’s last peak of 4.94%.
What are the driving forces behind the rise and fall of mortgage rates? One is the Federal Reserve’s intention to keep low rates for the next two or three years as an attempt for the government to support economic recovery and to help with uncertain progress in unemployment and the vaccine. The Fed does not control mortgage rates directly; their actions will still have an impact on rates.
Rates followed an overall increase in Treasury yields last week, which started high from the strong July jobs report before slowing in response to weaker consumer sentiment and concerns over COVID-19.
HousingWire’s Data Analyst, Logan Mohtashami, ultimately believes the rise of mortgage rates is contingent on the pace of the economy’s health.
What can these rates do for you?
Real Estate in 2021 continues to be consumer-friendly. Before rates begin to rise by fall, you may want to lock in a low rate. If you plan to buy a house in the next year or two, you will have a good chance of locking in a great rate. If you are a homeowner, you may want to consider refinancing. Industry professionals suggest doing it sooner rather than later. Make sure to reach out to our office or your mortgage lender for an estimate to make sure you get the best deal possible.
Home Prices Going Up
San Diego Homes prices have been rising, and we saw no difference in 2020. Freddie Mac reported that by the end of October 2019, home prices rose to 20 percent annually. Realtor.com’s housing report showed an increase of 12.7 percent annually for November. Home price predictions between industry professionals vary. The good news is that any price increase will not be as dramatic as 2020. And depending on how rates move, it could create a new effect on mortgage payments and affordability.
CoreLogic’s chief economist Frank Nothaft predicts price growth will slow once vaccines reach the general public. Altogether, Nothaft predicts a 2.1% growth rate across the year. Danielle Hale, chief economist at Realtor.com predicts higher appreciation, at 5.7% — though that’s still lower than what we’ve seen in 2020.
“This [price growth] is a much more manageable pace of increase than recent double-digit percent gains,” Danielle Hale of realtor.com said. “But mortgage rates that are steady or rising won’t provide the same offset that they did in 2020, so monthly mortgage payments will rise and be challenging in a way that they haven’t been in 2020.”
If interest rates continue to rise, first-time homebuyers in San Diego, CA may be pushed outside the market, as affordability may be more of a challenge. Especially within the first half of the year, unemployment persists, and wage growth falls behind the increase in home prices and lack of supply.
For home prices to drop or stabilize, inventory will have to make significant progress. Even though sales numbers were up, both existing and new home supply reached an all-time low. The industry expects more new and existing homes to become available as the year progresses. Builder confidence is in a positive state, and housing starts were at a 1.5 million seasonally adjusted annual rate back in November. Homeowners who held off during the pandemic will begin listing their homes, which adds to the total available inventory.
Once again, inventory gain can help ground home prices, but the industry will continue to face the affordability factor depending on the economy and unemployment status. The housing sector has shown resilience repeatedly this past year. Though there may still be risk and uncertainty with 2022, the industry stands on a solid foundation. Stay informed, talk with your real estate and mortgage professionals, and reach out with any questions. If you plan to buy, sell, or refinance this year, we want to help you get there.
Mortgage rates hover near record lows today, but experts forecast they’ll rise in the coming months. Waiting could prove costly when that happens. Let’s connect today to discuss today’s rates and determine if now’s the time for you to buy.
*Updated August 24th, 2021
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like MSN, Forbes, Money.com, Realtor.com and edited by Creative Kidding Inc.