The year just started, but mortgage rates have already increased slightly. We are looking at much stronger economic activity and job growth as we head into 2017. There are expectations of lower taxes as well, so there is a lot of optimism. However, rates are expected to go up even more as the year goes on.
A forecast I recently saw on the U.S. News and World Report predicted that we will see an increase in rates of 0.5% to 1% this year. Currently, the average rate is 4.2%. What do these numbers mean to you?
Let’s look at an example. Say you have a $300,000 mortgage. With a 4% rate, your monthly payment is $1,432. With a 4.5% rate, the payment on the same $300,000 mortgage is $1,520 per month. If rates increase up to 5%, which many are expecting, the payment on that same mortgage would go up to $1,610 per month.
The question we all have is this: Will this in any way damage our housing market or cause prices to fall? Frankly, that’s very unlikely because we’re not even back to peak levels from 2007 at this point. We have a ways to go. As you can see in the 10-year growth chart in the video above, we have had solid, steady appreciation and a steady decline in inventory. At peak prices back in 2007, it might have taken a year or more to sell a home if you could sell it at all. Right now, it’s not hard to sell quickly.
Given that mortgage rates are going to go up even more, it makes a lot of sense to lock in your mortgage financing now. It puts you in a very strong position when you go out to purchase. That’s the place to start. In our next video, I’ll show you how to become a “sure thing” as a buyer.
Studies show that 89% of people hire an agent when they are ready to buy a home. My team and I would very much like you to consider using us as your agents in the event that you’re ready to buy or sell. Even if you just have a few quick questions, we would love to hear from you. Just give us a call or send us an email.