This post originally appeared on The Basis Point: Home Prices & Sales, Rates, Size Of U.S. Mortgage Market – September 2020
Lets look at mortgage rates, home prices, home sales, and size of U.S. mortgage market as of September 2020. Below I review 2020 by quarter, then the outlook through 2022. This MBA outlook incorporates (very volatile) probabilities about the election and path of the pandemic. So read my comments below the table to get current data on rates, monthly payments, refi cost savings, and whether to lock rates now.
LOCK TODAY’S MORTGAGE RATE LOWS BELOW 3%?
This outlook predicts 30-year fixed rates at 3% in Q3 and 3.1% in Q4 2020.
Today’s 30-year fixed mortgage rates are just below 3% with zero points.
A rate of 2.875% on a $250,000 loan gives you a payment of $1037.
Wow! This is why the size of the U.S. mortgage market will be $3 trillion this year alone. More on this in next section below.
When rates drop and the economy is under strain, the question is always:
Do I hold for lower rates?
The first part of the answer is based on the outlook, and there are two near-term factors: progress on a coronavirus vaccine, and outcome of the election.
Rates will rise as a vaccine becomes more probably, and rates will likely remain steady despite election outcome because markets perceive both candidates as market friendly.
The second part of the answer depends on your timeline.
If you’re refinancing and waiting for lower, you better have the stomach for rates to rise — and if you look at the 2020 to 2022 outlook at the bottom of this post, you’ll see rates are projected to rise as the economy gets back on its feet.
If you’re buying a home, it won’t matter what rates do because you’ll need to lock a rate as soon as you’re in contract to buy a home so you can get your loan closed and meet the terms of your purchase contract. So you’ll be subject to whatever rates are available at that time, and the great news is rates are insanely low right now.
MONTHLY PAYMENT ON NEW & EXISTING HOMES
– Median New and Existing home prices may stay steady at around $327,000 and $286,000 respectively.
– At these prices, total monthly cost with 10% down on a new or existing purchase would be $1722/month or $1518/month, respectively.
– This is all-in cost including principal, interest, taxes, insurance, and mortgage insurance.
– It also uses rates 3.25% instead of 2.875% on a 30-year fixed to account for premiums on a lower down payment.
-Compare those all-in monthly obligations to rents for a comparable property. This will make buying more attractive than renting in lots of cities.