Home buyers in the United States still miss the 3% mortgage rates that have been replaced by rates above 6%. The issue worries them because the higher rates make it impossible for them to acquire a property.
Given this concern, Zillow notes that mortgage affordability will improve, but not by much.
In the market rates have fallen from the peak of 7% and the stabilization of housing prices have helped improve affordability. Even for real estate, additional improvements, albeit modest, are likely to occur over the next year.
For Zillow, the expectation is that by the end of 2023, prices will moderate and fees will stabilize below their maximum of 7%, a combination that will result in better affordability for homebuyers.
“A higher-than-expected increase in mortgage rates would likely cause prices to fall, but low levels of inventory for sale would likely limit any significant price declines and ultimately minimize the impact on affordability,” he says. the report. “In addition, mortgage rates have a bigger impact on monthly payments than prices, so a rise in rates in this scenario would outweigh the benefits of a modest price decline.”
On the contrary, says Zillow, “a decline in mortgage rates would likely stoke demand from homebuyers and encourage prices to start rising again. This scenario of falling rates but accelerating price growth would likely improve affordability for part of the next year, but the share of income spent on a total monthly payment will almost certainly remain much higher than the historical average.”
For real estate, regardless of any realistic path forward for mortgage rates and home prices, mortgage affordability will continue to be a barrier for many potential home buyers and sellers.
But while mortgage affordability as a whole may not look rosy next year, Zillow says there are many policies and products that can help potential buyers overcome the financial hurdle and become homeowners.
So it recommends:
· Take advantage of down payment assistance, as there are thousands of assistance programs across the country that many prospective buyers don’t know they qualify for.
· Pay your mortgage rate, this is essential to pay to reduce the mortgage rate. Each point costs 1% of the loan value and reduces the mortgage rate by 0.25 percentage points.
· Consider different mortgage products. Many lenders offer mortgage products to help buyers achieve affordability. Two common examples of such products are 2-1 repurchases and adjustable rate mortgages.
“This market does not have to be against you. While the market may not seem to be in anyone’s favor and senior mortgage affordability is unlikely to return to normal healthy levels any time soon, there are ways buyers and sellers can use existing resources to make affordability work for them,” says Zillow.
For more details on the report, click here.
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