cameron findlay
As home prices and mortgage rates rise and housing inventory remains severely limited, many homebuyers are asking: Should I buy? And if I want to buy, what do I need to know now about the real estate market? That’s why MarketWatch Picks created a Serie where we asked leading economists and real estate professionals for their thoughts on the housing market right now. For this one, we spoke with Cameron Findlay, Chief Economist and Executive Vice President of Capital Markets at AmeriSave Mortgage Corporation, which has financed more than $115 billion in loans since its inception in 2000. Findlay has spent more than 20 years in the mortgage industry: He was previously President and Director of Capital Markets at mortgage lender LoanSnap, Chief Economist at LendingTree, and Chief Economist and Director of Capital Markets Secondary Marketing at Discover Financial Services. We asked what homebuyers should know about the market right now. (See the lowest mortgage rates you can get here.)
Mortgage rates are rising, but put it in perspective
Rates have risen this year and are unlikely to drop materially any time soon, Findlay says. In fact, from early 2022 to now, rates have gone from just over 3% to about 6%, Bankrate data shows. “If you want to buy a house, the longer you wait, the longer it could cost you money or purchasing power,” says Findlay.
That said, it’s impossible to predict the future, but if you’re worried about rate hikes, you might want to consider a rate lock. Typically, these “allow you to lock in today’s rate for a period of 90 days,” Findlay explains. In fact, others experts have debated what will happen to mortgage rates in the coming months, with inflation playing a big role in the path of rates.
Although rates have risen significantly this year, Findlay points to this: Mortgage rates are still somewhat low by historical standards. “Rates were 18% the last time inflation was this high in the early 1980s, and they hit 8.5% in 2000,” says Findlay. (See the lowest mortgage rates you can get here.)
Don’t expect home prices to drop significantly anytime soon
With data from Freddie Mac indicating that the United States is short of more than 3 million homes, there is still a shortage of inventory and new home construction is slowing significantly. That means prices are unlikely to decline significantly anytime soon, even if buyer demand begins to wane. “In some markets, prices may level off if rates continue to rise, but if you’re thinking of sitting on the sidelines until prices start to fall, you may end up waiting a while,” says Findlay. Other economists agree that even if the real estate market cools down a bit, home prices won’t drop significantly.
Rates ‘vary widely’ by lender and loan type, so shop smart
Market volatility has created a wider-than-normal range of mortgage rates among lenders, Findlay says. “Rates now vary widely from provider to provider, which can add up to thousands of dollars difference in loan costs,” he says. “For every percentage point increase in a mortgage rate, the borrower on a $300,000 loan will pay an additional $190 per month. Over the entire life of a 30-year mortgage, that’s a substantial difference — more than $67,000,” says Findlay. (See the lowest mortgage rates you can get here.)
Findlay says buyers may want to look at different types of loans. “A good rule of thumb is that if you plan to stay less than 7 years, you may want to consider a higher loan rate with a larger repayment to cover closing costs and moving expenses, and if you plan to keep the home for longer than 7 years, you should opt for a lower rate,” says Findlay. Reimbursement funds can be used to offset fees and cover not only non-lender closing costs, but also prepaid expenses such as property taxes and insurance premiums. In fact, if you only plan to be in the house for a few years, you might also consider an adjustable-rate mortgage (ARM), which can save you money as long as you plan to sell it within 5-7 years.
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