Todays Rates: Purchase - 30 Year Fixed: 3.125%   APR: 3.201%     15 Year Fixed: 2.375%   APR: 2.494%      30 Year Fixed High Balance: 3.125%   APR: 3.205%      15 Year Fixed High Balance: 2.500%   APR: 2.608%          Refinance - 30 Year Fixed : 3.375%   APR: 3.432%     15 Year Fixed: 2.625%   APR: 2.726%      30 Year Fixed High Balance: 3.375%   APR: 3.436%      15 Year Fixed High Balance: 2.625%   APR: 2.769%

Mortgage and Housing Outlook: 2018

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by Stephen Casil
Vice President
Secondary Marketing Manager
scasil@elyons.com

Where do I see mortgage rates going in 2018?

According to the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS), the average 30 Year Fixed Mortgage Rate dropped by approximately 0.25% in 2017, from 4.20% at the beginning of 2017 to 3.99% at the end of 2017.  Many market analysts are expecting the 30 Year Fixed Mortgage Rate to gradually rise and end up at the mid 4.50% range by the end of 2018.  The Mortgage Bankers Association forecasts a 4.60% 2018 year-end 30 Year Fixed mortgage rate, and the National Association of Realtors predicts it will end the year at around 4.50%.  This forecasted increase in mortgage rates for 2018 is due to the anticipation of possibly three more Fed rate hikes this year, along with further expected improvements in the U.S. economy stemming from the recently passed U.S. tax overhaul.

In 2018, I expect 30 Year Fixed Mortgage Rates will rise to around 4.75%.  This rise in mortgage rates will be driven by a possible pickup in U.S. inflation expectations due to added wage growth, along with continued gains in U.S. economic growth from consumer spending, and an increase in U.S. business investment stemming from lower corporate tax rates.

Where do I see the housing market going in 2018?

The U.S. Housing Market remained very strong in 2017.  The most recent U.S. Existing Home Sales and New Home Sales reports showed increases in single family home sales of 5.6% and a 17.5% respectfully, both to their highest levels since 2007.  In addition, the S&P/Case-Shiller Home Price Index showed a 6.2% year-over-year increase in housing prices in 20 major cities.   Most economists believe that housing price appreciation will possibly slow, with Zillow expecting a 4.1% rise in 2018 housing prices and the National Association of Realtors expecting that median home prices will increase by around 1%-3%.

The major reason for an anticipated decline in the rate of housing price appreciation is due to a possible continued rise in mortgage rates, which can negatively affect home affordability, as well as a potential higher inventory of homes for sale from a projected pickup in construction of new residential properties.  Overall, as the United States employment picture continues to improve, housing prices are projected to continue to rise, albeit at a pace not as rapid as the previous few years.

Steve Casil

So, in my opinion, the best bet for homebuyers who are looking to buy a house in 2018 is to lock into a fixed mortgage rate once the contract of sale is finalized.   At these ever-appreciating housing price levels, an additional increase in mortgage rates might negatively affect home affordability, especially for first-time homebuyers.  At this point, mortgage rates are still low historically, so there is no reason to take on the risk of any surprise jumps in mortgage rates that might adversely affect your future monthly mortgage payments.


 

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