Understanding Today's Mortgage Rates and House Pricing

In the past two years, the number of people wanting to buy homes has been much higher than the number of homes available for sale. This has caused the prices of houses to go up very quickly.

It doesn't help that inflation has significantly ballooned worldwide, including in the United States. To better control the effects of inflation, the Federal Reserve began raising interest rates as early as March 2022, which has made borrowing pricier on top of significantly higher base prices.

Inflation occurs when the rates of goods and services go up over time. The Federal Reserve is the United States' central bank and is in charge of, among other things, controlling the money supply. When the Fed raises interest rates, it becomes more expensive to borrow money, which can help to slow down inflation.

Here, the best mortgage company in Massapequa, New York, shares what you need to understand about mortgage rates today:

How Does 2022's Real Estate Market Differ From That Two Years Ago

Two years ago, the average list price of a home in the US was $374,500. The average interest rate on a 30-year mortgage was 3.11%.

Now, the average home price is $525,000, with an average interest rate of 7.06%.

If you had bought a home two years ago with a 30-year mortgage and 20% down, the average purchase would have cost you $536,551 in principal and interest over the loan's course.

In today's market, the average purchase would require a principal and interest payment of $1.11 million over 30 years with a 20% down payment. This would amount to a difference of over $500,000 by the end of the mortgage.

The Federal Reserve has raised interest rates to try and control inflation. Prices have increased for a few reasons, one being that there was already a housing shortage in the US before the pandemic hit. This put us at a disadvantage when things started to go downhill.

The pandemic has led many white-collar workers to relocate to less expensive locales, as they can now work remotely. This increased demand and prices in these areas as people compete for properties.

Will Home Prices Be Going Down?

It's still too early to say if home prices are going down. Usually, prices go down a little bit from June to August, but the decrease was larger this year than usual. This could be good news for people who want to buy a house.

In short, home prices are still rising, but at a slower rate than they were earlier in the year. We'll have to wait for more data to see if this trend continues.

Inventory levels are still low, which keeps prices high. While new builds increased in August, this was partially due to supply chain issues that caused builders to receive a burst of supplies at the end of summer.

This means that the inventory of available homes for sale will not increase significantly, even though new construction has increased.

The demand for rental properties has increased significantly in the past two years as home prices have become unaffordable for many Americans. Developers have been focusing their energy on building more rental units to meet this demand. If we look at multi-family housing projects with five units or more, there was quite an increase in new builds in the past year.

This means that although there may be more houses available right now, in the future, there will be even fewer. This is because people are not getting permits to build new homes, so the housing market will eventually become even tighter than it is now.

Sales of homes in the $250,000 to $500,000 range have decreased from last year. This is because fewer potential sellers are willing to list their homes at higher prices. With fewer homes on the market, buyers have fewer choices, and houses take longer to sell.

Sales for homes that cost between $750,000 and $1 million were lower than usual, too.

Are Mortgage Rates Increasing Further in 2022?

The Federal Reserve has started raising interest rates, making borrowing more expensive. This includes taking out a mortgage.

The Fed has announced another interest rate hike of 0.75 percentage points, bringing the federal funds rate up to 3% to 3.25%. This is only expected to be the beginning, as there will likely be two more rounds of hikes totaling an additional 1.25 percentage points by the end of the year.

The Federal Reserve recently hinted that interest rates could rise as high as 4.6% in 2023. This is a significant increase from the current rate of 2.5%.

The average rate on a 30-year mortgage is around 7.06% in early October 2022. It is possible that rates could go up even higher than this, but it is not yet known by how much.

If mortgage interest rates go up, fewer people will want to buy homes since they will be more expensive. This will also discourage people from selling their homes because they will have to take out a new mortgage with a higher interest rate.

Many Americans have a mortgage with an interest rate lower than 6%. If they were to list their property, the increased financing costs on any new property would likely offset any gains made on the sale.

So, Should You Buy Now or Wait Until Later Before You Buy a House?

It's possible that buying a home sooner rather than later could save you money on interest rates.

That said, while regional decreases may indeed happen, national averages are expected to stay right about where they are now.

Whether the prices of houses rise or fall will be highly variable depending on your local market.

Interest rates will likely rise throughout the next few years until the Federal Reserve hits 4.6%. After that, it is difficult to predict what will happen with the rates, as it depends on various factors, such as inflation.

Conclusion

The prices of homes are likely to hold over the coming year, though they have seen huge inflation since before the pandemic started. If you need to purchase a property in the next 12 months, note that it's likely that rates are lower now compared to what they could be in the coming months. Of course, to know more about current mortgage rates, it's best to speak to the best mortgage broker in your area.

Lakeview Mortgage Bankers is one of the best mortgage bankers in New York that can offer straightforward and hassle-free mortgage solutions. Find out how we can help you today!

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