With home prices and mortgage rates skyrocketing, and housing inventory severely limited, many buyers are wondering: Should I buy? And what do I need to know about the housing market now if I want to buy? That’s why MarketWatch Picks has created a series where we ask leading economists and real estate experts for their views on the current housing market. And for that, we speak with Cameron Findlay, Chief Economist and EVP of Capital Markets for AmeriSave Mortgage Corporation, which has backed more than $115 billion in loans since its inception in 2000. Findlay has spent more than 20 years in mortgage lending — previously president and head of capital markets at mortgage lender LoanSnap, chief economist and chief economist at LendingTree, and head of capital markets secondary trading at Discover Financial Services. We asked him what home buyers should know about the market. (See the lowest mortgage rates you can get here.)
Mortgage rates are rising – but keep that in perspective.
Prices have risen this year and are unlikely to decline materially anytime soon, Findlay says. In fact, from the start of 2022 to now, rates have gone from a little over 3% to about 6%, Bankrate data shows. “If you want to buy a house, while you’re waiting, you can spend money on yourself or buy energy,” says Findlay.
That said, it’s impossible to predict the future, but if you’re worried about rate hikes, you might want to consider a rate lock. These typically “allow you to lock in today’s price for 90 days,” explains Findlay. Indeed, other experts have argued that what will happen to mortgage rates in the coming months, inflation will play an important role in inflation.
Although rates have risen significantly this year, Finley points out that mortgage rates are still somewhat low by historical standards. In the early 1980s, this peak inflation was last at 18 percent, and as high as 8.5 percent in 2000, Findlay says. (See the lowest mortgage rates you can get here.)
Don’t expect house prices to drop significantly anytime soon
The U.S. is more than 3 million homes short, according to data from Freddie Mac, while there is still an inventory problem and new home construction is slowing sharply. That means prices aren’t likely to drop significantly even if buyer demand is slowing in the near future. “In some markets, if prices are going up, the price may be high, but if you’re planning to stay put until prices start to fall, you might be able to hold on for a while,” says Findlay. Other economists agree that even if the housing market cools down a bit, home prices won’t fall significantly.
Rates vary widely by lender and loan type, so shop wisely
Market volatility has created a wide range of higher-than-normal mortgage rates among lenders, Findlay says. “Right now rates vary widely from provider to provider, which can make thousands of dollars of difference in your loan costs,” he says. “For every percentage point increase in the mortgage rate, the borrower on a $300,000 loan would pay $190 more per month. Over the life of a 30-year mortgage, that’s a huge difference — more than $67,000,” says Findlay. (See the lowest mortgage rates you can get here.)
Findlay says consumers want to look at different types of loans. “A good rule of thumb is if you plan to stay for less than 7 years, you may want to take out a higher loan amount with a higher down payment and cover closing costs and keep the home longer. Over 7 years, you should opt for a lower rate,” Findlay says. Not only can it be used to cover upfront costs such as property taxes and insurance premiums, but in fact, if you’re only planning to stay in the home for a few years, consider an adjustable rate mortgage (ARM) that can save you money as long as you plan to sell within 5 to 7 years. You may want to.
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