What 2023 rate chaos means for homebuyers and sellers

Lenders, home buyers, and especially home sellers are spooked for good reason. The 2022 and 2023 mortgage rate chaos has been intense. In 2022, rates began at 3.25%, peaked at 7.375% near Halloween, dropped to 6% in early February 2023, hit 7% by late February, and are now near 6.5%. What a ride. Now what?

Do we get a spring home buying bump now?

Can the Fed beat inflation in 2023?

Even if they do, are we just in a higher-rate era now?

Can people even afford today’s home prices?

And most important, what can home buyers, sellers, and lenders do about it?

I answered all these questions in this guest blog for Total Expert:

2023 Rate Chaos Recap & Homebuyer Opportunity Rundown

It’s written to speak to lenders, but the lessons for home buyers and sellers are the same.

Here’s an excerpt on affordability:

Median existing home prices are $363,000, down $50,800 from a June 2022 peak of $413,800.

Monthly cost on a $363,000 home purchase with 5% down and a 6.5% rate would be $2881.

If your borrower had no other monthly debt, they’d qualify making $80k per year. If they had $600 in credit card, auto, and other monthly debt, they’d qualify making $97k per year.

Newly built home prices are $438,200, down $58,600 from the October 2022 peak of $496,800.

Monthly all-in cost on a $438,200 home purchase with 5% down and a 6.5% rate would be $3456.

If your borrower had no other monthly debt, they’d qualify making $96k per year. If they had $600 in non-housing monthly debt, they’d qualify making $113k.

This is still affordable for millions of households.

The question is what sellers may do from here.

On the one hand they have rates in the 3-4% range and have a little trouble with going to a rate with a 6 on it.

But they also have record home equity, so if they sold to buy a new home, their down payment would be huge.

So their monthly payment would end up being attractively low.

I explain more of the rate, economic, and housing outlook in the post, which is a fast, informative read.

Go check it out and let me know what you think.

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Reference:

– 2023 Rate Chaos Recap & Homebuyer Opportunity Rundown

– Home affordability right now for existing homes and newly built homes