Well, the first is that in April of 2021 the 30-year fixed-rate mortgage was 2.98% whereas this year that rate has climbed to just over 5%. Home prices are up 20% since April 2021. Throw in below normal housing inventories, and we could be seeing a slowdown in the sector. So, the cost to purchase a home has risen exponentially from last year.

A recent report from technology-powered real estate brokerage Redfin revealed that the typical home buyer’s monthly payment rose 39% annually from April 2021 to April 2022 … the largest annual increase on record. Last year at this time, the average monthly mortgage payment was $1,635 and has risen to $2,349 at the current rate. Also, homebuyer competition declined in March for the first time in six months due to the rise in mortgage rates and higher home prices. As demand slips it is pushing more sellers to drop asking prices.

Redfin Chief Economist Daryl Fairweather said, “The number of buyers willing to pay such high mortgage payments could evaporate by late summer.”

That is what we must watch. Will mortgage rates continue to rise and will soaring inflation continue to eat into potential buyers’ pockets? The Federal Reserve has vowed to combat rising inflation with all its tools to bring costs down. Time will tell.

But to put it in perspective, 15-20% gains on housing prices are historically frothy. Here are a few facts. U.S. house prices rose 17.1% year over year in December 2021, following an increase of 18.4% year over year in the previous quarter. However, growth data available from March 1992 to December 2021 showed an average growth rate of 5.3%. CoreLogic recently forecasted that home price gains will rise 6% from March 2022 to March 2023.

Bottom line: Now is always a good time to purchase a home for every day a new family is formed, or single people are looking to dive into homeownership. It’s historically a good investment if you hold onto it long enough and it’s YOUR place to call home.

Source: Mortgage Market Guide

We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.