Mort­gage rates are ex­pected to rise in 2019. If you’re shop­ping for a home, it could get tougher

Connecticut Post (Sunday) - - Real Estate - By Caitlin Mccabe Visit Philly. com. Dis­trib­uted by Tri­bune Con­tent Agency, LLC.

For the last few weeks, the econ­omy has been pretty con­fus­ing.

The U. S. stock mar­ket took a ma­jor nose­dive last month, fin­ish­ing as the worst De­cem­ber since 1931, dur­ing the Great De­pres­sion. On Christ­mas Eve, the stock mar­kets suf­fered their steep­est de­cline. Then, just two days later, stocks had amirac­u­lous come­back, with the Dow Jones In­dus­trial Av­er­age soar­ing more than 1,000 points in a sin­gle day for the first time.

Mean­while, things have been equally un­clear re­gard­ing jobs and wages. The unem­ploy­ment rate is at a 49- year low of 3.7 per­cent, yet more than 60 per­cent of Amer­i­cans re­cently said they did not re­ceive a pay raise at their cur­rent job or get a bet­ter- pay­ing job in the last 12 months. That all comes as job cre- ation has slowed, and op­ti­mism among man­u­fac­tur­ers — a crit­i­cal voter base for Pres­i­dent Don­ald Trump — has slipped. Ask Trump about the jobs num­bers, how­ever, and he will tell you they are do­ing fine. ( And on Wed­nes­day, he said last month’s stock- mar­ket down­turn was caused by a “lit­tle glitch.”)

So you’re prob­a­bly won­der­ing what’s hap­pen­ing with the hous­ing mar­ket’s mort­gage rates — the one thing that con­sis­tently af­fects how much you pay for a home. In Oc­to­ber, the 30- year fixed mort­gage rate jumped past 5 per­cent for the first time since 2011, cre­at­ing con­sid­er­able spec­u­la­tion among mar­ket ob­servers that mort­gage rates would only go up from there. Then, in De­cem­ber, the rates ticked back down again, hov­er­ing at 4.5 per­cent around Christ­mas.

It’s dif­fi­cult to pre­dict where mort­gage rates — or the econ­omy — will go, with fore­casts and re­al­i­ties chang­ing month- to- month, or dayto- day.

Still, most econ­o­mists ex­pect that mort­gage rates will con­tinue to rise through­out the year. The hous­ing web­site and re­search com­pany Zil­low projects that by the end of 2019, rates will reach 5.8 per­cent. The Na­tional As­so­ci­a­tion of Real­tors’ vice pres­i­dent of re­search has said 5.3 per­cent. Fred­die Mac, mean­while, has a more con­ser­va­tive es­ti­mate, pre­dict­ing that the 30- year fixed rate will av­er­age 5.1 per­cent in 2019.

But what does that mean for the typ­i­cal home buyer, who likely doesn’t mon­i­tor mort­gage rates con­sis­tently?

Ac­cord­ing to one of the lat­est Zil­low re­ports, ris­ing rates can ac­tu­ally mean a lot.

In a De­cem­ber anal­y­sis that stud­ied hous­ing af­ford­abil­ity in mar­kets across the na­tion, Zil­low found that mort­gage rates can af­fect buy­ers’ bud­gets more than they might think. The higher that mort­gage rates rise, Zil­low found, the less a buyer can spend on a house and still keep pay­ments af­ford­able.

Con­sider, for ex­am­ple, a buyer who makes the cur­rent U. S. me­dian house­hold in­come of $ 61,240 and wants to spend 30 per­cent of that salary each month on a mort­gage pay­ment. In Jan­uary 2018, when mort­gage rates were 4.15 per­cent, the buyer could have bought a $ 393,700 home, ac­cord­ing to Zil­low’s re­search. Now, with rates hov­er­ing around 4.63 per­cent, a buyer who wanted the same monthly pay­ment could in­stead af­ford a $ 372,000 home — $ 21,700 less.

If mort­gage rates were to rise as high as 6 per­cent, Zil­low found, a buyer would in­stead have to shop for a $ 319,200 house to main­tain the same af­ford­abil­ity, a nearly 19 per­cent re­duc­tion in pur­chase price from the 4.15 per­cent mort­gage rate of this time last year.

“The in­ter­est rates are a re­ally, re­ally big deal,” said Sky­lar Olsen, di­rec­tor of eco­nomic re­search and out­reach at Zil­low. “A small change could im­pact your monthly mort­gage pay­ment quite a bit.”

Ris­ing mort­gage rates also could have rip­ple ef­fects across the en­tire mar­ket.

First- time or cur­rent buy­ers, in­tim­i­dated by the pos­si­bil­ity of tak­ing on more ex­pen­sive debt, could de­cide to de­lay or quit their hous­ing search al­to­gether, Olsen said. Home­own­ers would, as a re­sult, stay in their cur­rent prop­er­ties, re­duc­ing the num­ber of avail­able homes on the mar­ket. Gen­er­ally, a hous­ing mar­ket is con­sid­ered healthy when home­own­ers are trad­ing up, thereby free­ing up hous­ing for dif­fer­ent sub­sets of buy­ers. When cur­rent starter- home own­ers, for ex­am­ple, do not move on to larger homes, it’s harder for firsttime buy­ers to get into the mar­ket.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.