Last week, Fannie Mae came out with their projections that 30-year fixed rates would fall below the magical 6% mark later in 2024. Their projections pretty much validated my projections of rates breaching below 6% this year and heading into the mid-5% mark or lower by year’s end. While I believe we will continue to see a gradual slide to lower mortgage rates throughout the year, waiting for rates to fall .50% to 1% lower may cost you in the long run. I have run these figures before and will use the home price increase figure I projected for 2024 in last week’s Weekend Update/Aikenomics of roughly 5% for the Metro ATL. Using a 5% housing increase, which could be even more if we get to below 6%, we could see the price of a $600,000 home rise to $630,000 by year-end.
Let’s look at two comparisons. Below is a breakdown of sample scenarios using the national average of 6.75% for scenario one and predicting a 5.875% national average in August 2024 for scenario two. Rates and payments are not advertisements of available offerings. Payments do not include taxes and insurance.
|Purchase January 2024
|Purchase August 2024 (when rates are expected to fall)
|$570,000 30-Year Fixed-Rate Mortgage with 5% Down Payment at 6.75% = $3700 Principal & Interest Payment
|$598,500 30-Year Fixed-Rate Mortgage with 5% Down Payment at 5.875% = $3540 Principal & Interest Payment
On the surface, you save about $160 per month (whoo-hoo!). But do you? Your home price rose by $30,000, or a breakeven of roughly 150 months without compounding interest. If you buy now, you don’t run the risk of prices moving 5% higher or more this year. If I am correct in my forecast, you will most likely refinance to a rate below 6% by the end of the year, which will get you the best of both worlds! The only way you should wait is if you believe house prices and mortgage rates will fall this year.
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, January 25, 2024