Mortgage Rates Versus Housing Prices

Today’s Surging Mortgage Rates Versus Housing Prices

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will be comparing the skyrocketing mortgage rates versus housing prices. We will cover the forecast of mortgage rates versus housing prices.

Just a little over 12 months ago, mortgage rates were as low as 2.5% on a 30-year fixed-rate conforming loan. Home prices were surging like never before in history. Homebuyers felt helpless not being able to find a home they can make an offer. The American Dream of owning a home seemed to fade away as days, weeks, and months passed by. To make matters worse, mortgage interest rates were surging to new levels. Everyone is concerned about today’s surging mortgage rates versus housing prices. Will the surging mortgage rates cause housing prices to plummet?

What Does It Mean It Is a Seller’s Market?

It was an understatement to say it was a seller’s market. The minute a house was lister, dozens of buyers were bidding on the house. Homes selling $10,000 to $50,000 over list price was the norm. Inflation soared to double digits with no signs of retraction. The Federal Reserve Board was in a panic mode and started increasing rates.

The Difference Between Buyers and Sellers Markets

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Surging home prices have taken a break but demand for homes still remains strong. Today, rates are over 7.0% PLUS 2 to 4 discount points.

In the following paragraphs, we will cover and discuss mortgage rates versus housing prices and whether rates will soon be dropping. Inflation rates are soaring and many would-be homebuyers are afraid of pulling the trigger in buying a house for fear home prices will plummet.

The Surge in Home Prices Post-COVID ERA

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There is a definite correlation between mortgage rates versus housing prices. Home prices have been increasing for the past 3 years. Many Americans were hoping there would be a housing market correction when the coronavirus outbreak broke out in February 2021. However, home prices went in the opposite direction and surged upwards.

Home prices have gone up between 40% to 50% in the past two to three years. Many homeowners are sitting in a lot of equity right now. However, those unfortunate Americans who could not have a chance to buy a home are contemplating whether to buy a home now or wait and hope home prices drop.

Will Real Estate Prices Go Down To Affordable Levels?

In many areas, home prices appreciated double digits year after year despite the highest mortgage rates since the 2008 Housing Meltdown. The Federal Reserve Board have made no secret they are going to be increasing interest rates in the months to come to combat inflation.

The news of the Feds and surging inflation, have skyrocketed mortgage rates to an all-time high since the 2008 Financial Collapse. Mortgage rates are at a twenty-year high. In April 2021, mortgage rates were at a low of 2.25%.

Comparing Mortgage Rates versus Housing Prices Today

Back in early 2019, Federal Reserve Board Chairman Jerome Powell announced the FEDS will not increase interest rates in the first quarter of 2019. Many pre-approved home buyers were priced out of the housing market due to the combination of high home prices and high rates. Many borrowers were closing their home loans with rates between 5% to 5.75% in 2018.

Loan Level Pricing Adjustments were factored into these rates. Today, home prices surged over 40% since 2018 and rates are now over 7.0%. Besides rates north of 7.0%, prime borrowers also need to pay discount points. The home refinance mortgage market is completely dead. What will high mortgage rates versus housing prices be in the near future? Will home prices drop?
Comparing Mortgage Rates versus Housing Prices Today

Forecast on Mortgage Rates Versus Housing Prices

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Mortgage rates keep on increasing despite bad economic news and soaring inflation numbers. Home prices have somewhat slowed but demand still remains strong. Benchmark par 30-year fixed mortgage rates hit an all-time high at 7.52%. Rates have been increasing the past few weeks after FEDS Announcing inflation is soaring and expected higher rates. Last week, the mortgage hit a 20-year high again at 7.54%. This week mortgage rates of 7.52% hit a 20-year high again beating last week’s 7.34%. 15-year fixed rates hit 6.93%.

When Will Mortgage Rates Versus Housing Prices Stabilize?

Par mortgage rates will no doubt be heading towards the 8.0% mark in the coming weeks. Par conforming rates for prime borrowers with 740 FICO with a 20% down payment will no doubt be over 8.0%.

Other loan programs such as FHA, VA, and USDA mortgage rates follow conforming mortgage rates. Pricing adjustments need to be added to par mortgage rates. Loan Level Pricing Adjustments are interest rate hits. Example of pricing adjustments is lower credit scores, type of property, loan size, LTV, DTI, and manual versus automated underwriting.

Comparing Mortgage Rates Over 12-Month Span

The Federal Reserve Board has been increasing rates and to make it worse, Jerome Powell announced the Feds will keep on increasing interest rates. Due to high mortgage rates, refinance applications came to an abrupt halt. Mortgage rates versus housing prices: Rates still remain high for homeowners to realize a net tangible benefit to refinance. Alex Carlucci, a senior loan officer, and an Associate Contributing Editor at Gustan Cho Associates is a housing market and interest rate expert and issued the following statement:

Homeowners Holding Back In Refinancing

Refinance loan applications hit a historic low. This is due to high mortgage rates. There are many borrowers with co-borrowers that need to refinance to take co-borrowers out of the mortgage. Folks who get divorced often need their ex-spouse off the loan. High mortgage rates last year affected many folks who needed to refinance. Although the drop in rates is not significant, it seems like we are making progress.

Will Mortgage Rates Drop Again?

What impact will there be on mortgage rates versus housing prices. Will rates drop again? When is a good time to lock rates in? Nobody can answer these questions. Rates can easily go back up next month. Or it can continue to drop. Many borrowers lost the chance of getting a mortgage back in 2021 when rates were at historic lows of 2.25%.

According to data from the Mortgage Bankers Association’s weekly survey recently, refinance loan applications came to almost an abrupt halt from last week’s activity. This translates to a 40% decrease in mortgage loan applications from last week. The same data showed only showed a 0.54% increase in home purchase mortgage loan applications.

What Are Experts Saying About Mortgage Rates Versus Housing Prices

Alex Carlucci of Gustan Cho Associates said the following with regard to recent mortgage activity:

How The Economy Affects Mortgage Rates Versus Housing Prices

After President Trump took office, the economy has been hot. The United States has the lowest unemployment rate in decades. Economic numbers are setting historical records year after year. The Dow Jones Industrial Average was strong and there was no market volatility. The housing market was booming with no signs of a correction. Inflation was at a steady pace at 2%.

Surging Mortgage Rates Versus Housing Prices

The Federal Housing Finance Agency (FHFA) has increased conforming loan limits to $647,200 for 2022 due to high home prices. HUD, the parent of FHA, followed FHFA and increased FHA Loan Limits to $420,680 due to high home prices.

When we have an uncertain economy under the Biden administration. The Federal Reserve Board normally increases rates to slow the economy down. This is what happened in 2018 when the FEDS increased interest rates four times. Nobody knows what mortgage rates are headed to in the coming days, weeks, or months. Home buyers and homeowners should take the low mortgage rates versus housing prices today to lock in their home loans. We will be watching the impact on mortgage rates versus housing prices.

This blog on Mortgage Rates versus Housing Prices was written by Michael Gracz, senior loan officer and associate contributing editor at Gustan Cho Associates We will keep our viewers posted on the impact of today’s surging mortgage rates versus housing prices.

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