This month, Arch Mortgage Insurance released their spring housing and Mortgage Market Review.The report explained that an increase in mortgage rates and/or home prices would impact monthly payments this way:
A 5% increase in home prices increases payments by roughly 5%
A 1% rise in interest rates increases payments by roughly 13% or 14%
That begs the question…
What if both rates and prices increase as predicted?
The report revealed:
“If interest rates and home prices rise by year-end in the ballpark of what most analysts are forecasting, monthly mortgage payments on a new home purchase could increase another 10–15%. That would make 2018 one of the worst full-year deteriorations in affordability for the past 25 years.”
The percent increase in mortgage payments would negatively impact affordability. But, how would affordability then compare to historic norms?
Per the report:
“For the U.S. overall, even if affordability were to deteriorate as forecasted, affordability would still be reasonable by historic norms. That is because the percentage of pre-tax income needed to buy a typical home in 2019 would still be similar to the historical average during 1987–2004. Thus, nationally at least, even with higher rates and home prices, affordability will just revert to historical norms.”
What about home prices?
A decrease in affordability will cause some concern about home values. Won’t an increase in mortgage payments negatively impact the housing market? The report addressed this question:
“Even recent interest rate increases and higher taxes on some upper-income earners didn’t slow the market, as many had feared…Short of a war or stock market crash, housing markets could continue to surprise on the upside over the next few years.”
To this point,Arch Mortgage Insurance also revealed their risk Index which estimates the probability of home prices being lower in two years. The index is based on factors such as regional unemployment rates, affordability, net migration, housing starts and the percentage of delinquent mortgages.
Below is a map depicting their projections (the darker the blue, the lower the probability of a price decrease):
If interest rates and prices continue to rise as projected, the monthly mortgage payment on a home purchased a year from now will be dramatically more expensive than it would be today
Author:Jackie Henry Phone: 623-910-7249 Dated: April 26th 2018 Views: 65 About Jackie: ...
View our latest blog posts in your RSS reader. Click here to access.
Having the right real estate agent means having an agent who is committed to helping you buy or sell your home with the highest level of expertise in your local market. This also means helping you understand each step of the buying or selling process. This commitment level has helped us build a remarkable track record of delivering results.
Whether you are an experienced investor or a first time buyer, We can help you in finding the property of your dreams. Please feel free to browse our website or let us guide you every step of the way by calling or emailing to set up an appointment today.
"We hired Michae Cavallucci with REMAX DesertShowcase as our realtor when we made the decision to sell our home. Michae was able to answer our many questions and guide us through the necessary steps to make this partnership efficient and successful. Our home was on the market all of one day before we had an offer that we accepted. Michae vetted our buyer and assisted us through the inspection/appraisal process with sure hands. Any and all concerns/issues raised were mitigated in short order. We closed escrow and the entire process completed almost a week early. I would highly recommend REMAX DesertShowcase and specifically MIchae Cavallucci to anyone in need of professional real estate services. We are very appreciative of Michae Cavallucci's hard work and commitment to us as the customer. Great job!"