Experts say mortgage rates will continue climbing.
For the past few weeks, the economy has been pretty confusing.
The stock market took a major nose dive last month, finishing as the worst December since 1931, during the Great Depression. On Christmas Eve, the stock markets suffered their steepest decline. Just two days later, stocks had a miraculous comeback, with the Dow Jones Industrial Average soaring more than 1,000 points in a single day for the first time. On Thursday, stocks plummeted again, with the Dow tumbling 660 points.
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 get a pay raise at their current job or get a better-paying job in the past 12 months. That all comes as job creation 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. (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, 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 and even day to ay.
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, rate 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 rate will average 5.1 percent in 2019.
But what does that mean for the typical homebuyer, 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.
“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.”
Still, multiple economists noted, mortgage rates remain low, compared with the past. After reaching a peak of more than 18 percent in October 1981, the 30year fixed mortgage rate hovered between 7 and 10 percent for all of the 1990s and early 2000s.
An “important thing to keep in mind is that rates are coming off of unprecedented historic lows,” said Kevin Gillen, a senior research fellow at the Lindy Institute for Urban Innovation at Drexel University. “Once they cross 6 percent, however, you can start to become more concerned.”