It’s a conversation that cannot be avoided and takes center stage… 7.49% mortgage rates are here.
Regular readers know I write about hyperlocal ideas in Delray Beach and our surrounding areas. But today I’m detouring as 7.49% mortgage rates are too important to ignore.
The last time rates were 7.49% was in late December, 2000, or 23 years ago. Have a look:
Today I break down what this means for today’s homebuyers and seller. It’s startling.
One year ago today, the 30-yr mortgage rate was 5.6%, or 1.88% less. But that’s nothing. Two years ago the rate was 2.9%.
So, below I show the comparison of housing payments for someone buying a median priced US home around $400k with 5% down payment from two years ago to today.
5% down on $400k leaves a loan amount of $380k. At 2.9% your month mortgage payment was $1,581.
Today, at 7.49% mortgage rates, your monthly payment is $2,651. That’s an increase of $1,070, or 68% in just two years. My question is: who got a 68% pay increase in the last 24 months?
That’s what a 4.6% jump in interest rates did to your monthly payment.
And it gets worse. This means you’ve lost 46% purchasing power. That’s right, with so much of your earning now going to 7.49% mortgage rates, you’re spending on other things is going down.
How 7.49% Mortgage Rates Affect Your Overall Loan Payments
Here’s the icing on the cake. Two years ago at 2.9%, the total amount of interest payments you’ll make over the 30-year loan was $189,403. But at today’s 7.49% mortgage rates, the interest payments over the life of that loan is $574,653.
That’s $386k more in interest payment today than you would’ve paid at the loan two years ago.
Now that I’ve spoiled your morning coffee, let me share this…
Demand remains strong as I shared in my latest video. Why? 1) inventory remains unusually low – there’s a shortage between 2.3 million and 6.5 million homes in the US. And, home sellers who are mis-pricing their properties are being penalized. One year ago the average Days On Market was near 31 days. Today it’s 55 days.
And if you read headlines in today’s news, you’ll find predictions where experts thinks mortgage rates will be by end of 2023 and into 2024. I’ve gone back to late 2022 and scoured google to find these headlines.
Not one “pro” or “expert” got this years’ rate correct. No one came close to 7.49% mortgage rates. Most said we’d “come close to 7%, then start seeing rates fall back to the 6% range.”
So, when you’re thinking of where rates are headed, look at the 10-yr Treasury yield. It’s as close of an indicator to use. And it’s been rising. Look at this going back to 2020:
To put a lid on this, 7.49% mortgage rates may be here for longer than you think. The Fed is still open to more rate hikes to slow inflation. Until that narrative changes, 7.49% mortgage rates will remain part of everyone’s real estate conversation.
Enjoy your morning brew.
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*** Come out and have some fun at tonight’s Art & Jazz Festival on Atlantic Ave.
*** Downtown Delray Beach Summer Deals: https://www.downtowndelraybeach.com/lovedelray
*** Did you download the Green Door app I shared last week? It’s a great way to manage, maintain and improve your home’s energy efficient performance.
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*** Your Weekly Inventory Update ***
* 4 years ago there were over 54,000 properties available in S. Florida
* It bottomed in February 2022 at 14,485… a 73% drop
* Last week there were 27,730 available… a 102% rise in 18 months
* This morning’s Inventory is 27,913.
*** Inventory is DOWN 23 of 30 weeks… but up the last 3 week***
