Rising Mortgage Rates Not Stopping Borrowers

The monthly mortgage cost of a San Diego County Home has gone up $177 since the election, but that hasn’t stopped people from wanting to buy. Applications were up 12% in November compared to the same time last year, the Mortgage Bankers Association reported. But, that was down 3% from October.
So are people concerned about interest rates or not?
Michael Fratantoni, chief economist for the MBA, said that home buying, especially for first timers, is based more on job and income growth – rarely interest rate concerns. “As long as the job market remains strong and wage growth is picking up the way we see it, that’s going to be the driver”, he said. “A slight increase in mortgage rates is not going to stop most buyers.” Frantantoni said the association predicts mortgage rates to stay between 4-5 percent throughout 2017.
Matthew Shaver, a San Diego senior mortgage consultant at Finance of America, said his branch saw a 15% increase in purchase applications in November from the previous year, higher than the national trend. He believes rates will go back down once investors get over the recent stock market rally and put money back in bonds. One reason Shaver, and many economists, predicts rates will go back down has to do with president-elect Donald Trump. Since the election, many investors are pulling money out of government-backed assets, like bonds, because they believe Trump’s infrastructure improvement plans will create a deficit and lead to higher inflation. That makes bond yields go up and mortgage rates typically track the yield on the U.S. 10-year Treasury. So, in an indirect way, mortgage rates could go back down if investors become more comfortable with a Trump presidency.
For a typical 30-year fixed rate mortgage with 20% down, the interest rate was 3.59% the day before the election. Towards the end of December, the rate was 4.35%. The median home price in San Diego County reached $507,500 in October. Over the life of the loan, the price of a home has gone up $63,914 since the election.
I don’t really think our market really has a lot of sideline sitters!