Mortgage rates have increased significantly since the beginning of the year. Each Thursday, Freddie Mac releases its Primary Mortgage Market Survey. According to the latest survey, the average 30-year fixed-rate mortgage has risen from 3.22% at the start of the year to 3.55% as of last week. This is important to note because any increase in mortgage rates changes what a purchaser can afford. To give you an idea of how rising mortgage rates impact your purchasing power, see the table below:

How Can You Know Where Mortgage Rates Are Headed?

While it’s always difficult to know exactly where mortgage rates will go, a great indicator of where they may head is by looking at the 50-year history of the 10-year treasury yield, and then following its path. Understanding the mechanics of the treasury yield isn’t as important as knowing that there’s a correlation between how it moves and how mortgage rates follow. Here’s a graph showing that relationship over the last 50 years:

This correlation has continued into the new year. The treasury yield has started to climb, and that’s driven rates up. As of last Thursday, the treasury yield was 1.81%. That’s 1.74% below the mortgage rate reported the same day (3.55%) and is very close to the average spread we see between the two numbers (average spread is 1.7).

Where Will the Treasury Yield Head in the Future?

With this information in mind, a 10-year treasury-yield forecast would be a good indicator of where mortgage rates may be headed. The Wall Street Journal just surveyed a panel of over 75 academic, business, and financial economists asking them to forecast the treasury yield over the next few years. The consensus was that experts project the treasury yield will climb to 2.84% by the end of 2024. Based on the 50-year history of following this yield, that would likely put mortgage rates at about 4.5% in three years.

While the correlation between the 30-year fixed mortgage rate and the 10-year treasury yield is clear in the data shown above for the past 50 years, it shouldn’t be used as an exact indicator. They’re both hard to forecast, especially in this unprecedented economic time driven by a global pandemic. Yet understanding the relationship can help you get an idea of where rates may be going. It appears, based on the information we have now, that mortgage rates will continue to rise over the next few years. If that’s the case, your best bet may be to purchase a home sooner rather than later, if you’re able.

Bottom Line

Forecasting mortgage rates is very difficult. As Mark Fleming, Chief Economist at First American, once said:

“You know, the fallacy of economic forecasting is don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”

However, if you’re either a first-time homebuyer or a current homeowner thinking of moving into a home that better fits your changing needs, understanding what’s happening with the 10-year treasury yield and mortgage rates can help you make an informed decision on the timing of your purchase.

If you were thinking about buying a home this year, but already pressed pause on your plans due to rising home prices and increasing mortgage rates, there’s something you should consider. According to the latest report from ATTOM Data, owning a home is more affordable than renting in the majority of the country. The 2022 Rental Affordability Report says:

“. . . Owning a median-priced home is more affordable than the average rent on a three-bedroom property in 666, or 58 percent, of the 1,154 U.S. counties analyzed for the report. That means major home ownership expenses consume a smaller portion of average local wages than renting.”

Other experts in the industry offer additional perspectives on renting today. In the latest Single-Family Rent Index from CoreLogic, single-family rent saw the fastest year-over-year growth in over 16 years when comparing data for November each year (see graph below):

Molly Boesel, Principal Economist at CoreLogic, stresses the importance of what the data shows:

“Single-family rent growth hit its sixth consecutive record high. . . . Annual rent growth . . . was more than three times that of a year earlier. Rent growth should continue to be robust in the near term, especially as the labor market continues to improve.”

What Does This Mean for You?

While it’s true home prices and mortgage rates are rising, so are monthly rents. As a prospective buyer, rising rates and prices shouldn’t be enough to keep you on the sideline, though. As the chart above shows, rents are skyrocketing. The big difference is, when you rent, that rising cost benefits your landlord’s investment strategy, but it doesn’t deliver any sort of return for you.

In contrast, when you buy a home, your monthly mortgage payment serves as a form of forced savings. Over time, as you pay down your loan and as home values rise, you’re building equity (and by extension, your own net worth). Not to mention, you’ll lock in your mortgage payment for the duration of your loan (typically 15 to 30 years) and give yourself a stable and reliable monthly payment.

When asking yourself if you should keep renting or if it’s time to buy, think about what Todd Teta, Chief Product Officer at ATTOM Data, says:

“. . . Home ownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay.”  

If buying takes up a smaller portion of your pay and has benefits renting can’t provide, the question really becomes: is renting really worth it?

Bottom Line

If you’re weighing your options between renting and buying, it’s important to look at the full picture. While buying a home can feel like a daunting process, having a trusted advisor on your side is key. Let’s connect to explore your options so you can learn more about the benefits of homeownership today.

Some Highlights

• Buying a home and wondering if your inspection is necessary? While some buyers may decide to waive their inspection, it’s risky decision.
• Your home inspection is a crucial step in the homebuying process. It assesses the condition of the home you plan to purchase, so you can avoid costly surprises down the road.
• Let’s connect so you have expert advice and a trusted professional who will keep your interests top of mind.

Last week, the average 30-year fixed mortgage rate from Freddie Mac jumped from 3.22% to 3.45%. That’s the highest point it’s been in almost two years. If you’re thinking about buying a home, this news may have come as a bit of a shock. But the truth is, it wasn’t entirely unexpected. Experts have been calling for rates to rise in their 2022 projections, and the forecast is now becoming a reality. Here’s a look at the projections from Freddie Mac for this year:

• Q1 2022: 3.4%
• Q2 2022: 3.5%
• Q3 2022: 3.6%
• Q4 2022: 3.7%

As the numbers show, this jump in rates is in line with the expectations from Freddie Mac. And what they also indicate is that mortgage rates are projected to continue climbing throughout the year. But should you be worried about rising mortgage rates? What does that really mean for you?

As rates increase even modestly, they impact your monthly mortgage payment and overall affordability. If you’re looking to buy a home, rising mortgage rates should be an incentive to act sooner rather than later.

The good news is, even though rates are climbing, they’re still worth taking advantage of. Historical data shows that today’s rate, even at 3.45%, is still well below the average for each of the last five decades (see chart below):

That means you still have a great opportunity to buy now with a rate that’s better than what your loved ones may have paid in decades past. If you buy a home while rates are in the mid-3s, your monthly mortgage payment will be locked in at that rate for the life of your loan. As you can see from the chart above, a lot can change in that time frame. Buying now is a great way to protect yourself from rising costs and future rate increases while also securing your payment amount for the long term.

Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

“Mortgage rates surged in the second week of the new year. The 30-year fixed mortgage rate rose to 3.45% from 3.22% the previous week. If inflation continues to grow at the current pace, rates will move up even faster in the following months.”

Bottom Line

Mortgage rates are increasing, and they’re forecast to be even higher by the end of 2022. If you’re planning to buy this year, acting soon may be your most affordable option. Let’s connect to start the homebuying process today.

Over the past two years, we’ve lived through one of the most stressful periods in recent history. Because of the health crisis, many of us have spent more time at home and that’s led us to re-evaluate both what we need in a house and how much we appreciate having a safe space. If you’ve found your current home isn’t filling all your needs, you may be wondering if it’s time to find a new one.

There’s reason to believe a change of scenery could boost your happiness. Catherine Hartley, an Assistant Professor at New York University’s Department of Psychology and co-author of a study on how new experiences impact happiness, says:

“Our results suggest that people feel happier when they have more variety in their daily routines—when they go to novel places and have a wider array of experiences.”

A move could be exactly the new experience you’ve been looking for. If that’s something you’re considering to better your lifestyle, here are a few things to keep in mind.

Approach Your Decision Thoughtfully and Explore Your Options

Buying and selling a home is a major life change, and it’s not a decision you should enter lightly. But, if you’re questioning whether or not a move would bring you more happiness, it’s important to explore if it’s the right choice for you.

To find out more and discuss your options, reach out to a local real estate professional. They’ll explain the process – including how to list your existing house and search for a new one – in clear and simple terms.

You should also think about your lifestyle and what you’re hoping to get out of your move. What needs aren’t being met in your current home? What features would bring you more joy and make your life easier? For example, are you now working remotely and need a home office? Do you crave more fresh air and open outdoor space to unwind in? Knowing the answers to these questions can help you get started and position your real estate advisor to work with you so you can find just the right home.

Consider a Location with Weather That Will Boost Your Mood

Home features aren’t the only thing to consider. You should also weigh your options when it comes to location. Is the weather something that’s important to you? Does it have a tendency to impact your mood? If it does, you may want to factor it into your next move. The World Population Review shares:

“What states have the best weather? When evaluating each state for temperature, rain, and sun, some states stand out. . . . Climate and weather preferences are personal and subjective. . . . “

Better weather can mean different things to different people. Some prefer the heat, others cooler temperatures, and some want to experience all four seasons. Think about what makes you feel happiest and prioritize that in your home search. If you’re moving to a whole new location, your agent is a great resource with a strong network to support you along the way.

Bottom Line

Moving could provide you with a fresh beginning and the chance to find happiness in your new home. Let’s connect today to talk about your goals and options in the current market.

When you think of homeownership, what’s the first thing that comes to mind? Chances are you might focus on the non-financial benefits, like the security or stability a home provides. But what about equity? While it can be overlooked, a homeowner’s equity helps build long-term wealth over time. Here’s a look at what equity is and why it matters.

For a homeowner, your equity is the current value of your home minus what you owe on the loan. So, as home values climb, your equity does too. That’s exactly what’s happening today. There aren’t enough homes on the market to meet buyer demand, so bidding wars and multiple offers are driving prices up. That’s because people are willing to pay more to buy a home. Right now, this low supply and high demand are giving current homeowners a significant equity boost.

Dr. Frank Nothaft, Chief Economist at CoreLogic, explains it like this:

“Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”

To find out just how much rising home values have impacted equity, we turn to the latest Homeowner Equity Insights from CoreLogic. According to that report, the average homeowner’s equity has grown by $56,700 over the last 12 months.

Curious how your state stacks up? Check out the map below to find out the average equity gain for your area.

How Rising Equity Impacts You

If you’re already a homeowner, equity not only builds your wealth, it also opens doors for you to achieve your goals. It works like this: when you sell your house, the equity you built up comes back to you in the sale. You can use those proceeds to fuel your next move, especially if you’ve decided your needs have changed and you’re looking for something new.

If you’re thinking about becoming a homeowner, understanding the importance of equity can help you realize why homeownership is a worthwhile goal. It builds your wealth and gives you peace of mind that your investment is a wise one, not just from a lifestyle perspective, but from a financial one too.

Bottom Line

Whether you’re a current homeowner or you’re ready to become one, it’s important to know how equity works and why it matters. If this inspires you to make a move, let’s connect to explore your options and find out what steps you need to take next.