Freddie Mac’s mortgage rates rose to 3.05% this week, up 40 basis points from January. Limiting mortgage-backed security purchases to $40 billion per month, ahead of the Fed’s much-anticipated plan to reduce bond purchases.
Certainly, supply chain challenges and labor shortage have contributed to the massive 5.4% rise in the Consumer Price Index.
A barrel of oil is almost double the price a year ago, which is now at least $73.
Do High Mortgage Rates And Inflation Torpedo Home Prices? What do experts see on the housing road ahead?
Zillow senior economist Jeff Tucker thinks the pace of home price hikes will slow next year. The National Zillow Home Value Index is expected to grow 7-9% next year. This is a slowdown from August 2020’s growth rate of 11.7% to August 2021.
Tucker said price gains will be even slower in expensive West Coast markets such as Seattle, San Francisco and Southern California.
“Markets with the most expensive prices will hit a plateau,” he said. “The prior (home value) gains were almost entirely offset by lower interest rates.”
Nevertheless, the demand for home buying remains strong despite the rise in interest rates. Using rents as a barometer of housing demand for all types of housing, Tucker said rents are rising in all markets. Because price gains and mortgage rates make it harder for millennial home buyers, Tucker suggests they consider working from home at least two or three days a week in the future.
“With a good job, they can buy a house where they can afford,” he said.
Tucker sees 30-year fixed mortgages climbing to 3.25% this year, descending to around 3.4-3.7% by the end of 2022.
Redfin chief economist Daryl Fairweather sees the national home price rise 3-5% for 2022, with the 30-year term mortgage rate ending at 3.6%.
Fairweather cites climate change as the housing crisis for the next 30 years.
“Even if we come down to zero carbon emissions, every year is worse,” she said. “Insuring homes in (California) prone areas is expensive. Brush cleaning and metal roofing are expensive. Forest fires cause huge economic losses. “
She sees Palm Springs as a strong area for remote workers to buy homes.
Fairweather is optimistic about recent California rezoning laws to increase the housing supply.
Raymond Scheer, director of the Anderson Center for Economic Research at Chapman University, said rising interest rates could cause a drop in home prices in 2023.
Sfeir thinks the Federal Reserve will start reducing next month, a third less purchases in Treasury and mortgage bonds, currently at $120 billion a month. Short-term interest rates like prime will rise soon.
“I wouldn’t be surprised if house prices start going down in 2023,” he said.
The only thing keeping prices up is the small number of homes for sale. Sfeir observed that people are living in their homes on average for about nine years, compared to the historical average of five years. And retirees are staying because senior retirement homes are extremely expensive.
As for inflation, Sephir said, “Fed board members are wrong every time they meet.”
California Association of Realtors chief economist Jordan Levine sees California’s median home prices rise 5.2% in 2022, compared to a 20.3% gain projected for 2020. But don’t expect prices to drop.
“We don’t see home prices reversing,” Levine said. He predicted sales would fall 5.2% next year from 2021 levels.
Demand has returned quicker than supply. California lost 2.7 million jobs last year due to the pandemic. Levine saw that we’ve already gotten 1.7 million jobs back.
Freddie Mac Rate News: The 30-year fixed rate average stood at 3.05%, which is 6 basis points higher than the previous week. The 15-year fixed rate averaged 2.3%, which is 7 basis points higher than the previous week.
The Mortgage Bankers Association reported that mortgage application volume was unchanged from last week.
ground level: Assuming that a borrower receives an average 30-year fixed rate on a loan corresponding to $625,000, last year’s payment was $81 less than this week’s payment of $2,652.
I’m looking for: Locally, well-qualified borrowers can obtain the following fixed-rate mortgages without points: a 30-year FHA at 2.25%, a 15-year traditional at 2.25%, a 30-year traditional at 2.875%, a 15- The one-year traditional high-balance ($548,251 to $822,375) at 2.69%, the 30-year traditional high-balance at 3.125% and the 30-year fixed jumbo at 3.625%.
Eye Catching Loan of the Week: Fixed rate of 15 years at 2.5% at no cost.
Jeff Lazerson is a mortgage broker. He can be contacted at 949-334-2424 or [email protected] His website is www.mortgagegrader.com.