Mortgage rates are more than double what they were a year ago — and likely to go even higher — but the federally backed mortgage giant Fannie Mae says that relief may be on the way for homebuyers.
For the week ending Sept. 8, 30-year fixed-rate mortgages averaged 5.89% — up from 5.66% a week earlier, and 2.88% a year ago. Fannie Mae has predicted that the 30-year fixed-rate mortgage will drop to an average of 4.5% in 2023, REALTOR magazine reports. Still, economists say home buyers who can afford to purchase now are better off moving forward rather than waiting for lower mortgage rates. Even if borrowing costs drop next year, high home prices likely will remain a challenge, Keith Gumbinger, vice president of the research firm HSH, recently told CNBC.
The latest surge in mortgage rates means the market has reached a tipping point, according to Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors. Data shows that the typical family in the U.S. can no longer afford to buy a median-priced home when mortgage rates rise over 5.7%. At that point, the typical family needs to spend more than 25% of its income on the mortgage payment. Adding other expenses such as mortgage insurance, home insurance, taxes, and expenses for property maintenance, home buying becomes burdensome for the typical family.
Meanwhile, as mortgage rates remain volatile, it’s becoming increasingly necessary for home buyers to shop around for a loan to find savings. According to Freddie Mac, the other federally backed mortgage giant, borrowers potentially could save an average of $1,500 over the life of a loan by gathering one additional rate quote from a lender. And borrowers could save even more by gathering five different quotes from lenders — up to $3,000, Freddie Mac research shows.
Zillow predicts that metro New York City home values will grow 4.8% by June 2023 — with sale prices likely to follow suit.
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