While house prices and mortgage rates are rising and the housing stock remains severely limited, many buyers are wondering: should I buy? And if I want to buy, what do I need to know about the housing market? That’s why MarketWatch Picks has created a series in which we ask leading economists and real estate professionals about their current view of the housing market. To do this, we talk to Cameron Findlay, the chief economist and EVP of Capital Markets for AmeriSave Mortgage Corporation, which has funded more than $115 billion in loans since its inception in 2000. Findlay has spent more than 20 years in the mortgage industry — formerly as president and chief of capital markets at mortgage lender LoanSnap, chief economist at LendingTree, and chief economist and chief of secondary marketing of capital markets at Discover Financial Services. We asked him what home buyers need to know about the market right now. (Check out the lowest mortgage rate you can get here.)
Mortgage rates are rising – but put that in perspective
Rates have risen this year and are unlikely to fall substantially any time soon, Findlay says. Indeed, from early 2022 to now, rates have gone from just over 3% to around 6%, data from Bankrate shows. “If you want to buy a home, you may end up costing yourself money or buying power the longer you wait,” says Findlay.
That said, it’s impossible to predict the future, but if you’re concerned about rate hikes, consider a rate lock. These “usually allow you to lock in the current price for a period of 90 days,” explains Findlay. Indeed, other experts have debated what will happen to mortgage rates in the coming months, with inflation playing a major role in interest rates.
While rates have risen significantly this year, Findlay points out: Mortgage rates are still on the low side historically. “Rates were 18% the last time inflation was this high in the early 1980s, and they were as high as 8.5% in 2000,” Findlay says. (Check out the lowest mortgage rate you can get here.)
Don’t expect house prices to fall any time soon
With data from Freddie Mac indicating the United States is more than 3 million homes short, there is still a shortage of inventory and construction of new homes is slowing significantly. That means prices are unlikely to fall significantly in the near term, even if buyer demand begins to decline. “In some markets, prices may stabilize if rates continue to rise, but if you’re thinking about sitting on the sidelines until prices start to fall, you may have to wait some time,” Findlay says. Other economists agree that even if the housing market cools somewhat, house prices will not fall significantly.
Rates ‘vary greatly’ per lender and per loan type, so shop smart
Market volatility has led to a wider-than-normal range of mortgage rates among lenders, Findlay says. “Rates now vary widely from provider to provider, which can cause thousands of dollars of difference in your borrowing costs,” he says. “For every percentage point increase in the mortgage interest rate, the borrower with a loan of $300,000 pays an additional $190 per month. Over the full term of a 30-year mortgage, that’s a significant difference — more than $67,000,” Findlay says. (Check out the lowest mortgage rate you can get here.)
Findlay says buyers may want to look at different types of loans. “A good rule of thumb is that if you plan on staying for less than 7 years, you may want to consider a higher loan rate with a bigger discount to cover closing costs and moving costs and if you plan on keeping the home longer. than 7 years you should opt for a lower rate,” says Findlay. Discount funds can be used to offset fees and not only to cover non-lender-related closing costs, but also prepaid expenses such as property taxes and insurance premiums. Indeed, if you plan on only staying in the house for a few years, you may also want to consider a variable rate mortgage (ARM), which can save you money as long as you plan to sell within 5 to 7 years.
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