SEATTLE, March 9, 2018 /PRNewswire/ -- Proposed reforms to
the government-sponsored enterprises (GSEs) that guarantee the
majority of U.S. home loans could drive up monthly housing costs
and diminish housing affordability for many Americans, according to
Zillow®.
Congress is considering changes to Fannie Mae and Freddie Mac to
reduce the risk to taxpayers if the housing market crashes again.
The GSEs, which guarantee a majority of all home loans against
defaults, have been under government conservatorship since 2008,
when they required more than $150
billion in taxpayer funds as a result of foreclosures during
the housing crisis.
But a Zillow analysis shows that potential changes would cost
borrowers as much as $400 a month in
mortgage costs.
The guarantee from Fannie and Freddie is thought to keep
interest rates for 30-year fixed-rate mortgages low, and housing
relatively affordable. If that guarantee is changed, the typical
American borrower could be facing shorter loan durations or higher
rates. In this analysis, Zillow examined how alternatives to the
traditional 30-year mortgage would affect borrowers' monthly costs,
using current home values and mortgage rates.
- Shorter-term loans: The typical borrower would pay an
additional $390 each month on the
median U.S. home for a 15-year fixed-rate mortgage instead of a
30-year loan.
- Higher rates similar to current jumbo loansi:
A 30-year non-conforming loan would cost borrowers about
$20 more per month for the typical
U.S. home. Jumbo, or non-conforming, loans are currently not
guaranteed by GSEs.
"Some GSE reform proposals could lead to the end of the 30-year
mortgage as we know it, which has long been the bedrock for
financing homeownership in America," said Zillow Senior Economist
Aaron Terrazas. "If monthly payments
do rise and, more importantly, stay elevated, at some point we'd
expect home prices to come down a bit in response to this decreased
purchasing power, and some long-time owners could opt not to sell
to preserve their smaller monthly payments. A shorter loan period
would mean the lifetime cost of the home is lower, and some
households may be able to absorb the extra monthly cost on their
mortgage. But in the nearer term, first-time homebuyers or buyers
on the margin could feel a real pinch as homeownership becomes
significantly less affordable."
Until actual changes are signed into law, it is difficult to
know what the typical loan will look like following GSE reform. To
see the impact of other interest rates and loan durations on
mortgage payments, visit Zillow Research:
https://www.zillow.com/research/mortgage-payments-rates-products-18773/
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|
Monthly
Mortgage Payment
|
Metropolitan
Area
|
Median Home
Value
December 2017
|
30-Year Fixed
Rate Mortgage
|
15-Year Fixed
Rate
Mortgage
|
30-Year
Nonconforming
Mortgage
|
United
States
|
$206,300
|
$777
|
$1,166
|
$797
|
New York/Northern
New Jersey
|
$429,900
|
$1,618
|
$2,430
|
$1,660
|
Los Angeles-Long
Beach-Anaheim, CA
|
$632,200
|
$2,380
|
$3,574
|
$2,441
|
Chicago,
IL
|
$214,000
|
$806
|
$1,210
|
$826
|
Dallas-Fort Worth,
TX
|
$219,900
|
$828
|
$1,243
|
$849
|
Philadelphia,
PA
|
$222,900
|
$839
|
$1,260
|
$861
|
Houston,
TX
|
$185,600
|
$699
|
$1,049
|
$717
|
Washington,
DC
|
$385,500
|
$1,451
|
$2,179
|
$1,488
|
Miami-Fort
Lauderdale, FL
|
$262,800
|
$989
|
$1,485
|
$1,015
|
Atlanta,
GA
|
$186,300
|
$701
|
$1,053
|
$719
|
Boston, MA
|
$439,400
|
$1,654
|
$2,484
|
$1,697
|
San Francisco,
CA
|
$910,600
|
$3,428
|
$5,147
|
$3,516
|
Detroit,
MI
|
$144,400
|
$544
|
$816
|
$558
|
Riverside,
CA
|
$340,800
|
$1,283
|
$1,926
|
$1,316
|
Phoenix,
AZ
|
$245,100
|
$923
|
$1,385
|
$946
|
Seattle,
WA
|
$468,000
|
$1,762
|
$2,645
|
$1,807
|
Minneapolis-St
Paul,
MN
|
$248,500
|
$935
|
$1,405
|
$959
|
San Diego,
CA
|
$565,000
|
$2,127
|
$3,194
|
$2,181
|
St. Louis,
MO
|
$150,800
|
$568
|
$852
|
$582
|
Tampa, FL
|
$193,300
|
$728
|
$1,093
|
$746
|
Baltimore,
MD
|
$261,100
|
$983
|
$1,476
|
$1,008
|
Denver, CO
|
$379,500
|
$1,429
|
$2,145
|
$1,465
|
Pittsburgh,
PA
|
$139,100
|
$524
|
$786
|
$537
|
Portland,
OR
|
$373,500
|
$1,406
|
$2,111
|
$1,442
|
Charlotte,
NC
|
$183,400
|
$690
|
$1,037
|
$708
|
Sacramento,
CA
|
$381,400
|
$1,436
|
$2,156
|
$1,473
|
San Antonio,
TX
|
$168,500
|
$634
|
$952
|
$651
|
Orlando,
FL
|
$214,900
|
$809
|
$1,215
|
$830
|
Cincinnati,
OH
|
$156,600
|
$589
|
$885
|
$605
|
Cleveland,
OH
|
$137,000
|
$516
|
$774
|
$529
|
Kansas City,
MO
|
$166,100
|
$625
|
$939
|
$641
|
Las Vegas,
NV
|
$246,700
|
$929
|
$1,394
|
$952
|
Columbus,
OH
|
$170,800
|
$643
|
$965
|
$659
|
Indianapolis,
IN
|
$142,300
|
$536
|
$804
|
$549
|
San Jose,
CA
|
$1,171,800
|
$4,411
|
$6,624
|
$4,524
|
Austin, TX
|
$280,200
|
$1,055
|
$1,584
|
$1,082
|
Zillow
Zillow is the leading real estate and rental
marketplace dedicated to empowering consumers with data,
inspiration and knowledge around the place they call home, and
connecting them with the best local professionals who can help. In
addition, Zillow operates an industry-leading economics and
analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of
economists and data analysts produce extensive housing data and
research covering more than 450 markets at Zillow Real Estate
Research. Zillow also sponsors the quarterly Zillow Home Price
Expectations Survey, which asks more than 100 leading economists,
real estate experts and investment and market strategists to
predict the path of the Zillow Home Value Index over the next five
years. Launched in 2006, Zillow is owned and operated by Zillow
Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
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i The
current market for jumbo loans is relatively small and skewed
toward the wealthy. The exact terms of today's jumbo loans may not
scale to the larger housing market.
|
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SOURCE Zillow