Mortgage Loan Total | Duration | Interest Rate | Monthly Principal and Interest Payment |
---|---|---|---|
$300,000 | 30 Years | 4% | $1,432.25 |
$350,000 | 30 Years | 2.75% | $1,428.84 |
As you can see, interest rates make all of the difference in the amount home buyers can afford. In 2019 the average 30-year mortgage had an interest rate of 4.46% and in 2021 the average rate was 2.74% (30-Year Fixed-Rate Mortgages Since 1971 – Freddie Mac).
So where are things headed from here? Well, on the supply side, we sit at about 6 months’ worth of housing supply nationally which is much more in line with the historic average. On the interest rate front, the Federal Reserve has already started to decrease the amount of mortgage backed securities they are purchasing and they have signaled an interest rate hike will occur in March. In anticipation for this, banks have already begun to increase the rates at which they will lend and the average mortgage rate sits at 3.45% as of January 2022. So, the typical drivers of housing prices are trending in a more normalized direction. The question becomes how high will supply and interest rates need to rise before we see a decrease in consumer demand causing home price appreciation to slow? To that I say, your guess is as a good as mine. I do not have a crystal ball but I’ll keep looking for one and if I find one, I’ll let you know.
This entry was posted on Friday, February 18th, 2022 at 1:17 am. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.