2016 was certainly a year for the books.
The Cubs won their first World Series title since 1908, the world saw record-setting weather phenomena, the vote for Brexit shocked the European Union, and (get ready for it), millennials finally started buying houses (especially in San Antonio)! In almost every major realm, 2016 forced us to sit up, wake up, and take a good, hard look at the way we view the world. From macro to micro, global to local, 2016 demanded a revised approach to economics, politics, and (in our case) the science of buying and selling houses.
Most notably, the 2016 market saw healthy increases. Low interest rates, strong wage growth, and an increase in millennial home buyers were just a few factors that pushed the market to new heights. All was going peachy…until a recent spike in mortgage interest rates quickly yanked off those rose-colored glasses, raising a whole slew of new questions about 2017.
Where are rates headed? What does this spike mean for first-time buyers? When is the best time to buy? How much do you really have to make to afford a home?
We’re here to decode the mortgage rates mystery. Below, we’ve outlined the changing market as it applies to San Antonio neighborhoods. Keep reading to learn why now is the time to buy...especially if you’re a first-time buyer in San Antonio!
Let’s talk about mortgages.
To understand the shifting rates, we’ve got to start with the basics. What is a mortgage, exactly? A mortgage is simply the loan you use to pay for your home. As a homeowner, you pay back the loan in regular installments over a set period of time, with interest.
In one sense, your mortgage rates are determined by your credit score, savings for a down payment, and location. However, your mortgage interest rate is also determined by a set of factors totally outside of your control. The bank, Federal Reserve, and “secondary market” (where mortgages are bought and sold) work together to determine these percentages.
While banks may be the traditional mortgage lender, other options include mortgage brokers (who negotiate the best deal for you), credit unions, pension funds, and even various government agencies. (You can learn more about the process by downloading our free Buyer’s Guide!)
Where are the rates headed?
Obviously, mortgage rates have been on the rise. Towards the end of the year, 30-year fixed rates reached 4.32% (up from 3.47% at the end of October). Experts predict that rates will continue to rise in 2017, likely remaining above 4% for most of the year...maybe even stretching towards 5% by the time 2018 rolls around.
What does this mean for you?
So what do these rate changes mean for the average San Antonio homeowner? Obviously, the increases will be felt the most by homebuyers and renters who aren’t locked into a current rate.
As prices are only expected to rise in 2017, you’ll receive the lowest interest rate possible now. Once you close on your home, your mortgage rate will lock...meaning that your rate will remain safe from the ever-fluctuating market (as long as you've chosen a fixed-rate mortgage). This also applies to current homeowners who are looking to refinance...which we also recommend doing so sooner than later!
The bottom line? The sooner you sign, the lower your rate will be. If you’re looking to get the best deal on a home, we recommend contacting a lender as soon as possible to get started on the mortgage process.
A Look at San Antonio Neighborhoods
Tobin Hill: 507 E Woodlawn Ave costs $880/month now, but may cost $922/month when rates go up.
Northwest Crossing: 7410 Sunscape Way costs $1,080 /month now, but may cost $1,132/month when rates go up.
Alamo Ranch: 11951 Coleto Creek costs $2,089/month now, but may cost $2,188/month when rates go up.
Olmos Park: 135 Park Dr: costs $5,409/month now, but may cost $5,668/month when rates go up. $829,000
The Bottom Line
If all this mortgage talk is making your head spin, don’t be scared off just yet. Experts have reminded us that it’s still easier to get a mortgage now than at any time in the past eight years (Mortgage Credit Availability Index). And, although the current rates may seem unprecedented, a quick zoom out reveals that rates are actually heading back towards their historical average. The past few years have just been exceptionally low.
Plus, the home buying process is getting easier for first-time buyers. Robert Dietz, chief economist with the National Association of Home Builders, noted: “On the supply side, builders are finding business models to provide the level of product, such as townhouses, that first-time buyers are looking for. And on the demand side, wage gains and the demographics of today’s millennials who are marrying and having kids later, will help.”
At its core, the world of real estate is a strange fusion of the macro and the micro, the individual family unit and the massive web of economic complexities. As a team of experienced and passionate REALTOR®, our goal is to act as the bridge between the two, making it as easy (and cost effective!) as possible to find your perfect family home...even after all the confusion of 2016.
At KW San Antonio, we are committed to making sure buyers have all the information they need when buying a home. Whether you're a first-time homebuyer or seasoned pro, it's always good to be informed (or reminded) of the process. Click here to download this FREE Buyer’s Guide, customized for the San Antonio buyer. You’ll find valuable information about finding a REALTOR®, connecting with lenders, making an offer, closing costs, and way more. Let us be your guide!
*Note: all prices have been calculated assuming a 30-year fixed mortgage, 20% down payment, property taxes, and home insurance. “Before” numbers were calculated with current rates (4.09%), and “after” numbers were estimated using a forecast of 4.75%.