This week saw a slight uptick in mortgage rates, prompting some prospective homebuyers to reconsider their plans. However, there are compelling reasons why waiting might not be the best strategy.
The sensitivity of home shoppers to mortgage rates was evident as the average for the 30-year fixed-rate mortgage rose to 6.77%, leading to a 3% decline in mortgage applications for home purchases, as reported by the Mortgage Bankers Association.
While fluctuations in rates can impact homebuyers’ purchasing power, borrowing costs have generally stabilized. Jessica Lautz, deputy chief economist at the National Association of REALTORS®, notes that despite weekly increases, the overall trend since fall 2023 has been a decline, currently standing a full percentage point below the recent high of nearly 8%. Lautz emphasizes that buyers should consider various factors beyond marginal changes in mortgage rates when timing the real estate market, as life events like new babies, marriages, and job changes play a more significant role in decision-making.
Moreover, waiting may not yield substantial savings. Lautz calculates that homebuyers acquiring a typical $400,000 home with a 20% down payment would have a monthly mortgage payment of approximately $2,080 at the current average rate. Although rates were slightly lower last week at 6.64%, resulting in around $70 less per month for buyers based on a median home price of $391,700, the difference is relatively modest.
Rising home prices add urgency to the decision-making process. Existing home prices reached an all-time high in December, according to NAR, with further increases expected. NAR’s forecast predicts a 1.4% annual median home price increase in 2024 and an additional 2.6% in 2025, reaching $405,200. Coupled with historically low housing inventory, this scarcity remains a significant hurdle for potential homebuyers, contributing to sustained pressure on home prices, according to economists.
In conclusion, while mortgage rates have shown some volatility, the broader context of market dynamics suggests that waiting may not be a prudent strategy for those considering a home purchase.
