Freddie Mac: 5.3% If you’re an RCFE renter with a desire to become an RCFE homeowner, you may be hoping that waiting a year might mean better market conditions to purchase an RCFE home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
- What will RCFE home prices be like in 2022?
- Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will RCFE home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
- Fannie Mae: 5.1%
- Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), an RCFE home that sells for $750,000 today would be valued at $797,025 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $47,025 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
- Freddie Mac: 3.8%
- Fannie Mae: 3.2%
- Mortgage Bankers Association: 4.2%
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. These rates are applicable for regular residential loans. For conventional RCFE loans, the interest rates are expected to be in the high 4% to low 5% range, and for SBA financing, approximately 5.5-6.5%. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $750,000 home this year with a 30-year fixed-rate loan at 5.0% after making a 10% down payment. Your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $3,624.
That same home could cost $797,025 by the end of 2022, and the mortgage rate could be around 5% (based on conventional financing mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $4,162.
The difference in your monthly mortgage payment would be $538. That’s $6,456 more per year and $193,680 over the life of the loan.
When asking if you should buy an RCFE home, as opposed to leasing, you probably think of the non-financial benefits of owning an RCFE home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
If you are considering buying, selling or leasing an RCFE, please call us TODAY to explore your options. We would be delighted to evaluate your business and provide price guidance. We will help you obtain the highest possible price for your RCFE.
Michelle (949) 397- 4506 & Melvyn (949) 500-3630