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Smoke predicts the most impacted markets (those with 10 percent or more by percentage of potential failed applications) will include: 1. Honolulu – 14 percent 2. Stockton, Calif. – 12 percent 3. Fresno, Calif. – 12 percent 4. El Paso, Texas – 11 percent 5. Fort Pierce, Fla. – 11 percent 6. San Diego – 11 percent 7. Visalia, Calif. – 11 percent 8. Chattanooga – 10 percent 9. Los Angeles – 10 percent 10. Miami – 10 percent
Homebuyers were granted a reprieve to lock in today’s relatively low mortgage rates with the Fed’s decision not to raise interest rates this month while the global economy shows weakness and inflation is under the Fed’s targeted rate of 2 percent.
“Those planning to get into the housing market in 2016 may want to consider a home purchase before the end of the 2015,” said Jonathan Smoke, chief economist for Realtor.com. “When rates go up, not only will monthly mortgage payments increase, that increase will also lessen some buyers’ ability to get approved for a home loan – due to an increased debt-to-income ratio.”
Smoke did an analysis of loan-level data from Optimal Blue, an enterprise lending services platform, and predicted that if the Fed boosts interest rates by 50 basis points over the next year, mortgage payments are likely to go up by 6 percent on new home loans.
In May, the average loan with a 30-year fixed mortgage was $231,000, which had a monthly principal and interest payment of $1,107 at the average interest rate of 4.03 percent. When rates reach 4.53 percent, that same loan amount would result in a monthly payment of $1,175, an increase of 6 percent.