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Higher mortgage rates are making homeownership less appealing given today’s prices.
Key points
- Mortgage rates have been higher to start off 2022.
- While Freddie Mac expects mortgage volume to hold steady this year in spite of rising rates, it may not be the best time for you to buy.
There was a time not so long ago when it was more than possible to sign a 30-year mortgage at under 3%. But those days are gone. In fact, mortgage rates have been higher to start off 2022, and as of this writing, the average 30-year mortgage rate is sitting at close to 3.8%.
On a historical basis, that’s still low. But in the context of the past year and change, that’s a notable uptick.
Of course, higher mortgage rates would be less of a big deal if home prices weren’t so inflated. But these days, home prices are up on a national level, and for the past year, buyers have relied on lower mortgage rates to help make up for them.
Now that those record-low rates are off the table, it begs the question: Is 2022 really a good time to purchase a home? Or should you scrap your plans and wait?
You may want to hold off buying a home
Freddie Mac recently released a forecast for 2022 that calls for home sales to hit 6.9 million this year. It also expects mortgage loan originations for home purchases to grow from $1.9 trillion in 2021 to $2.1 trillion in 2022.
Given that buyer demand is still strong, those projections aren’t surprising. Also, since home prices are up on a national scale, it stands to reason borrowers will need to take out higher mortgages to pay for them. That could explain the uptick in total loan originations Freddie Mac is calling for.
But while Freddie may have reasonably high hopes for the 2022 housing market, that doesn’t mean it will end up being a good year for you to buy. Quite the contrary — you may want to put your home buying plans on pause if prices don’t start to drop and mortgage rates continue to climb.
Overextending yourself on a home purchase could have dire consequences. On a basic level, it could create a situation where you’re perpetually stressed about money. In a more extreme scenario, it could cause you to lose your home to foreclosure, or otherwise wind …….