It’s likely that you are paying attention to almost everything you hear about the housing market if you are considering purchasing a home. Additionally, you receive information from a variety of sources, including the news, social media, your real estate agent, conversations with friends and family, overhearing conversations at the grocery store, and a long list of others. Most likely, the topics of home prices and mortgage rates are frequently discussed.
Take a look at what the data says to help you sort through the noise and provide you with the information you need most. When making a decision, the following are the top two questions you should ask yourself about home prices and mortgage rates:
1. Where Do I Think Home Prices Are Heading?
One reliable place you can turn to for that information is the Home Price Expectation Survey from Pulsenomics – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists.
According to the latest release, the experts surveyed are projecting slight depreciation this year (see the red in the graph below). But here’s the context you need most. The worst home price declines are already behind us, and prices are actually appreciating again in many markets. Not to mention, the small 0.37% depreciation HPES is showing for 2023 is far from the crash some people originally said would happen.
Now, let’s look to the future. The green in the graph below shows prices have turned a corner and are expected to appreciate in 2024 and beyond. After this year, the HPES is forecasting home price appreciation returning to more normal levels for the next several years.
This means that, but only if you buy now, your home will probably increase in value and you should accumulate home equity in the years to come. According to these projections, if you wait, the house will end up costing you more in the end.
2. Where Do I Think Mortgage Rates Are Heading?
Over the past year, mortgage rates have risen in response to economic uncertainty, inflation, and more. We know based on the latest reports that inflation, while still high, has moderated from its peak. This is an encouraging sign for the market and for mortgage rates. Here’s why.
When inflation cools, mortgage rates generally fall in response. This may be why some experts are saying mortgage rates will pull back slightly over the next few quarters and settle somewhere around roughly 5.5 and 6% on average.
But, not even the experts can say with absolute certainty where mortgage rates will be next year, or even next month. That’s because there are so many factors that can impact what happens. So, to give you a lens into the various possible outcomes, here’s what you should consider:
- If you buy now and mortgage rates don’t change: You made a good move since home prices are projected to grow with time, so at least you beat rising prices.
- If you buy now and mortgage rates fall (as projected): You probably still made a good decision because you got the house before home prices appreciated more. And, you can always refinance your home later on if rates are lower.
- If you buy now and mortgage rates rise: If this happens, you made a great decision because you bought before both the price of the home and the mortgage rate went up.
The reality is that no one can predict the future of mortgage rates. The best approach when buying a home is to make an informed decision based on the facts that we have. By buying now, while rates are on the rise, you are making a good investment in your future with an eye towards rising home prices. Whether you decide to make a move or wait to make a move, the key is to stay educated on what’s happening in the market and to ensure you are comfortable with the costs and commitments that come with owning a home. Be confident in your decisions knowing that you have considered all factors when it comes to buying a home with mortgage rates on the rise.