Sep 08

Mortgage Rates Hurt Buyers More Than Home Prices

Mortgage Rates Hurt Buyers More Than Home Prices

Mortgage rates were back on the rise this week, hitting an average of 5.55%, Freddie Mac reported Thursday. Rates are nearly double what they were a year ago, and the latest housing data from the National Association of REALTORS® demonstrates the impact of the jump in borrowing costs.

The nation is witnessing a “housing recession,” says NAR Chief Economist Lawrence Yun, as existing-home sales plummeted 20% year over year in July, according to NAR data. Contract signings also dropped 20% in the same month. And there’s been a significant pullback in the new-home market—sales in the sector were down 30% annually in July—causing homebuilder sentiment to slide for the eighth straight month.

Further, “apart from rising mortgage rates, home prices continue to show double-digit year-over-year gains,” Nadia Evangelou, NAR’s senior economist and director of forecasting, writes on the association’s blog. A median-priced home is worth about $40,000 more than a year earlier. While home price increases add to home buyers’ costs, the impact of higher mortgage rates is much more—triple the impact on a monthly mortgage payment, Evangelou notes. An increase of just one percentage point in mortgage rates has the same effect on mortgage payments as if home prices rose by 13 percentage points, she writes.

Homes haven’t been this unaffordable since 1989, NAR reports. Rising mortgage rates have made home loans more expensive, adding to the cost of homeownership. The typical monthly mortgage payment was nearly $2,000 in June, up 54%—or $679—compared to a year ago. “The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market,” says Sam Khater, Freddie Mac’s chief economist. “Home sales continue to decline, prices are moderating, and consumer confidence is low. But amid waning demand, there are still potential home buyers on the sidelines waiting to jump back into the market.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 25:

  • 30-year fixed-rate mortgages: averaged 5.55%, with an average 0.8 point, up from last week’s 5.13% average. Last year at this time, 30-year rates averaged 2.87%.
  • 15-year fixed-rate mortgages: averaged 4.85%, with an average 0.8 point, up from last week’s 4.55% average. A year ago, 15-year rates averaged 2.17%.
  • 5-year hybrid adjustable-rate mortgages: averaged 4.36%, with an average 0.4 point, dropping from last week’s 4.39% average. A year ago, 5-year ARMs averaged 2.42%.

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

©National Association of REALTORS®
Reprinted with permission

admin

For all of your Real Estate needs, place yourself in the competent hands of a career Realtor who is a Philadelphia native and Delaware County resident. Skilled, smart and enthusiastic about his work and his life, Anthony DiDonato has the appealing combination of business sense and people skills gives him an edge in an industry that demands both.

Educated at Drexel University with a dual major in accounting and finance and minors in management and psychology Anthony DiDonato offers over 25 years of experience in the real estate industry. He has been a real estate investor since 1985 and a member of H.A.P.C.O. (Landlord Association). He became a licensed Realtor in 1992 and a member of the Local, Pennsylvania and National Associations of Realtors. Anthony DiDonato is also a member of the Computerized Multiple Listings, (MLS) and Internet Marketing Programs. In 1997 Anthony DiDonato became Century 21 All-Elite, Inc. Corporate Secretary.

Anthony DiDonato believes in taking his profession to the highest level of quality service. He is known for finding that “perfect” property in Philadelphia, Delaware County, Chester County, Montgomery County and surrounding areas in Pennsylvania for his buyers and helping his sellers prepare their properties so they sell quickly and efficiently.

When it comes time to negotiate the terms of a contract, Anthony DiDonato has the knowledge, experience, and professionalism applied to meeting – or exceeding – his clients’ expectations. His service to his clients is second to none. His honesty and integrity have been his claim to fame.

For Superior Real Estate Representation in the Delaware Valley, Philadelphia, Delaware County, Chester County, Montgomery County and surrounding areas in Pennsylvania… call Anthony DiDonato.