Mortgage rates stayed low for the final week of 2021, but housing analysts largely predict rates will be heading up in the coming weeks.

“Mortgage rates have been effectively been moving sideways despite the increase in new COVID cases,” says Sam Khater, Freddie Mac’s chief economist. “This is because incoming economic data suggests that the economy remains on firm ground, particularly cyclical industries like manufacturing and housing. Moreover, low interest rates and high asset valuations continue to drive consumer spending. While we do expect rates to rise, the push the first-time home buyer demographic that’s been propelling the purchase market will continue in 2022 and beyond.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 30:

• 30-year fixed-rate mortgages: averaged 3.11%, with an average 0.7 point, rising from last week’s 3.05% average. Last year at this time, 30-year rates averaged 2.67%.
• 15-year fixed-rate mortgages: averaged 2.33%, with an average 0.7 point, up from last week’s 2.30% average. A year ago, 15-year rates averaged 2.17%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.41%, with an average 0.5 point, increasing from last week’s 2.37% average. A year ago, 5-year ARMs averaged 2.71%.

Freddie Mac reports national commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

National Association of REALTORS®
Reprinted with permission

Conforming loan limits for mortgages backed by Fannie Mae and Freddie Mac have jumped in most of the country to $647,200, an increase of $98,950 from 2021’s limit of $548,250. The higher levels are in response to rising home prices over the past year.

The new loan limits took effect Jan. 1.

The Federal Housing Finance Agency’s House Price Index shows that home prices rose 18.05%, on average, between the third quarters of 2020 and 2021. The 2022 conforming loan limits increased by the same percentage, the FHFA reports.

However, in areas where the local median home value exceeds the baseline conforming loan limit, the limits have risen more, the FHFA says. In higher-priced locations such as San Francisco and New York, the conforming loan limits for 2022 increased to $970,800. In 2021, that baseline was $822,375.

Find out the conforming loan limit for 2022 in your area at FHFA.gov.(link is external) You can also view the interactive map(link is external) below on the site.

Find out the conforming loan limit for 2022 in your area at FHFA.gov.(link is external) You can also view the interactive map(link is external) below on the site.

National Association of REALTORS®
Reprinted with permission

The hot housing market fueled an all-time record for the amount Americans borrowed to buy homes in 2021.

Mortgage lenders issued $1.61 trillion in purchase loans last year, according to preliminary data from the Mortgage Bankers Association. That tops a previous record set in 2005 of $1.51 trillion.

Home prices have grown by double digits over the past year. That is driving up mortgage balances as Americans stretch their budgets to afford a home.

The average amount borrowed to finance a home purchase in November climbed to $414,115, the MBA recently reported.

The Commerce Department reported that median sales prices for new homes rose nearly 19% in November, while the National Association of REALTORS® reported existing-home prices jumped by a median of 13.9% annually last month.

“Buying a home is really a statement of confidence in your job situation, your financial situation, your family situation,” Mike Fratantoni, chief economist at the MBA, told The Wall Street Journal.

The surge in home prices lately is outpacing the mix of rising incomes and low interest rates, economists say. Mortgages are less affordable relative to income than at any point since 2008, according to the Federal Reserve Bank of Atlanta, as reported by The Wall Street Journal. In the first part of 2021, a mortgage payment on a median-priced home comprised about 29% of a person’s income. By October, that percentage jumped to 33%.

As home prices rise, buyers aren’t just borrowing more but are bringing larger down payments to close as well. The national median down payment recently hit its highest level since at least 2005, ATTOM Data Solutions reports. The median down payment on a single-family home purchased with financing in the third quarter was $27,500, up 41% from $19,502 in the third quarter of 2020.

National Association of REALTORS®
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Mortgage rates have taken a big leap at the start of the new year. In the first week of 2022, the 30-year fixed-rate mortgage jumped nearly 60 basis points higher than a year earlier, averaging 3.22% this week, Freddie Mac reports.

“Mortgage rates increased during the first week of 2022 to the highest level since May 2020 and are more than half a percent higher than January 2021,” says Sam Khater, Freddie Mac’s chief economist. “With higher inflation, promising economic growth, and a tight labor market, we expect rates will continue to rise. The impact of higher rates on purchase demand remains modest so far given the current first-time home buyer growth.”

The National Association of REALTORS® forecasts that mortgage rates will average 3.7% by the end of this year.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 6:

• 30-year fixed-rate mortgages: averaged 3.22%, with an average 0.7 point, increasing from last week’s 3.11% average. Last year at this time, 30-year rates averaged 2.65%.
• 15-year fixed-rate mortgages: averaged 2.43%, with an average 0.6 point, increasing from last week’s 2.33% average. A year ago, 15-year rates averaged 2.16%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.41%, with an average 0.5 point, unchanged from last week. A year ago, 5-year ARMs averaged 2.75%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

National Association of REALTORS®
Reprinted with permission

The real estate industry is closely watching the so-called “Great Resignation,” a movement that started with the pandemic in which people are leaving the workforce in historically higher numbers. As more Americans quit their jobs, will they set out for greener pastures by moving to a new location?

The trend is only growing: In November, 4.5 million Americans left their jobs, pushing the nation’s resignation rate to a record high of 3%, MarketWatch reports. Some of the resignations have come as employers look to bring their workers back to the office after more than a year of remote work. About four in 10 workers say they’d look for a new job if their employer makes them come into the office five days a week, according to a survey of more than 2,300 people by University of Chicago researchers.

“ ‘Help wanted’ signs seem to be everywhere, as there are 10.6 million job openings. That is much higher than the figures for unemployed Americans in search of a job, at 6.3 million,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “The wage rate is showing an accelerating trend, with a 6% annualized gain in the fourth quarter of last year, up from 5% in the third quarter and 2% to 3% before the onset of the pandemic. Higher wages could feed into higher consumer price inflation, which, in turn, will lead to higher mortgage rates because lenders need to compensate for the loss in value of the purchasing power of money.”

More Americans may be feeling less tethered to a certain location. About 41% of employed Americans say they’d be willing to take a pay cut or accept a new job with a lower salary in order to move to a more affordable location, according to the latest consumer survey from Coldwell Banker. Younger people appear more willing to move than older workers: The Coldwell Banker survey found that respondents ages 18 to 44 are more likely than those ages 45 to 54 to be willing to accept a lower income in order to move to a more affordable location.

Miami, Atlanta, and Austin, Texas, have emerged as top locations where Americans say they’d like to relocate once they resign from their jobs, the survey found.

National Association of REALTORS®
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House hunters are watching mortgage rates closely. After all, every increase could have an impact on affordability, particularly given escalating home prices.

Nearly half—47%—of home buyers recently surveyed say they would feel more pressure to buy a home if mortgage rates passed 3.5%, according to a new consumer survey conducted by Redfin.

Mortgage rates are largely forecast to continue to rise over the coming months. Last week, the 30-year fixed-rate mortgage rose to its highest average since May 2020, averaging 3.22%, Freddie Mac reports. The National Association of REALTORS® forecasts that mortgage rates will average 3.7% by the end of this year.

Buyers who were surveyed say that increases in mortgage rates would also have an impact on the type of home they decide to purchase. Twenty-nine percent of buyers say that if mortgage rates increase above 3.5%, they will change their target areas to buy a home and seek a smaller one.

Only 7% of the 1,500 home buyers surveyed say they wouldn’t change their plans at all if mortgage rates rise above 3.5%, the Redfin survey shows. Only 2% would cancel their plans to purchase a home altogether if rates increase past that amount.

“Mortgage rates increasing will make homebuying less affordable,” says Daryl Fairweather, Redfin’s chief economist. “Over time, that will put the brakes on demand and put an end to double-digit annual price growth. But in the short term, this increase will light a fire under home buyers and make for an extremely competitive January.”

National Association of REALTORS®
Reprinted with permission