Mortgage rates need to hit this target before buying a home really makes sense again
- TheStreet
- Dec 13, 2023
- 1 min read
2023 has been a tough year to be a home buyer or a home seller.
The first problem has been high prices in many markets for homes owned by Baby Boomers paying 4% or lower on their mortgages.
The second problem has been that many buyers can't afford the combination of those higher prices and higher mortgage rates.
The unhappy result has been that home sales have been falling since the Federal Reserve started raising rates in early 2022: about 33% for sales of existing homes at the end of 2020 and 30% for newly constructed homes.
Mortgage rates have started to come down as the Fed has stopped raising rates. A rate on a 30-year fixed-rate loan has fallen from about 8% at the end of October to about 7.1% for a 30-year fixed-rate loan as of Dec. 1
The median price of a U.S. home is about $440,000. If you buy a home with a 20% down payment and an 8% mortgage, the monthly payment would be $2,582 (plus taxes and insurance).
Drop the rate to 7%, and the payment falls to $2,309, a monthly savings of $270. At 6%, the payment is $2,071, saving you an eye-catching $485 a month, more than $5,800 a year. A 5% loan (or close to it) would be a dream. The last time mortgage rates were that low was in the summer of 2022.
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