Happy New Year everyone!  As of January 2, 2025 mortgage rates have climbed to a little more than 7.1%.

As we look back over the last 3 years, we are all tempted to let out a YIKES!!

And there is absolutely no denying that home buyers who purchased a home in the early months of 2022 while the rates were as low as 2.7% were able to get a great bargain.  The questions remain:  Was this low rate normal?  Was it something we can expect to see again?

To answer that let's take a very brief look at mortgage rates over the last 20 years.

In January of 2005 we saw rates around 5.7%.  by August of 2007 they had reached numbers close to 6.9%. 

With the 2008 housing crash and recession, the Fed stepped in and bought up mortgage bonds to lower rates.  This helped and by 2009 rates were down below 5.5% once again.  They continued a steady decrease through the 2010's, hovering in the high 4% range.

Then 2020 and Covid hit.  The housing market came to a short, but rather grinding halt, as did much of our economy.  The Fed stepped in again, and using much the same rational and tactics of 2008 lowered the rates all the way down to the 2.7% we saw in late 2021 early 2022.  Since then, they have continued their slow but steady climb upward.

For buyers today it is very hard to look at this new 7.1%+ number and feel anything but frustration, especially if people they know got in on that 2.75% from just a few short years ago.

Now many of these present buyers, maybe yourself included, are waiting for the rates to fall again. But here's the bad news, you may be waiting for something that just will not happen.  Those rates under 3% were very artificially created and were not going to last.  That's bad news. 

Yet, when put in perspective the last 20 years of mortgage rates we see approximately a 3% increase.  Milk has increased about 20%, while a gallon of gas has gone up more than 50%.  Had we not had the pandemic of 2020 the mortgage rate we see today is probably near where rates would have been, given their history.  While that may be little consolation to those looking to buy now, it's not as abnormal a situation as some might want you to think.  In fact, it's probably the norm.

Maybe you are still going to wait and hope they come back down.  You certainly can take your chances, but consider this:

Housing prices in the area have increased around 37% since 2020, and more than 4% in the last year.

Let's take a home in Wrightsville, where I live, the home is currently on the market for $215,000. At the current interest rate, principal and interest together (not including PMI, INS, TXS), assuming a 5% down conventional loan you would pay:

$1,376.07

Now, let's say you wait a year for the rates to come down.  At around 4.5% increase in list price, the price of that home could now be listed at $225,000.  To get to a principal and interest payment of $1,375.74 you need the mortgage rate to come down to 6.675% at least. 

Is that possible?  Maybe.   But while we are not certain what rates will do, what we can say is certain is the continued increase in the listing price of homes.

There may or may not be a better rate. 

Well, this has all been bad news.

But here is the good news.

The good news is that if you buy that home now at the $215,000, and rates do fall to 6.675% you can lower your monthly principal and interest rate payment by refinancing to:

 $1,314.59

The person who waited until the rate went down to 6.675% while the price went up to $225,000 is still paying:

$1,375.74

If you act before prices continue to climb you may get a lower base price, and through refinancing you may be able to lower your rate.