The path to owning a home for Cape Cod residents may be turbulent this coming year. This is due to the recent shortage of homes for sale, higher mortgage rates and higher average selling prices for homes in the area. The focus for 2019 for many prospective homeowners is shifting to the subject of affordability.
By historical standards rates are still fairly low in the mid 4% range. In 2018, we saw rates start the year near 4% then increase all the way up to 5% then back off a bit to where we are now.
The overall projection is for rates to rise again in 2019. In 2018 we saw the Federal Reserve hike rates in all four quarters.
Interest rates make a difference in affordability. If a $300,000 home increases in value by 3% that’s roughly a $9,000 increase which will cost a buyer roughly $46 more per month (with a 30-year fixed rate mortgage of 4.625%, APR 4.78%).
For every half point or .50% increase in mortgage rates, this will cost a buyer roughly $105 more per month on a $350,000 loan.
These increases could mean tens of thousands of dollars in interest over the life of a 30-year loan. The bigger concern is that these increases could mean many would-be buyers are now squeezed out of the market due to inability to qualify any longer.
Here are some options for would-be homeowners to fight these rising costs:
Please feel free to contact me if you have any questions.