SEATTLE, Feb. 3, 2021 /PRNewswire/ -- With mortgage rates
at historic lows and homes flying off the market in record time,
many prospective home buyers may be contemplating whether to buy
now or wait until the frenzy slows down a bit. But the market is
poised to stay red hot for some time, and a new Zillow analysis shows how waiting might add
hundreds of dollars to a monthly mortgage payment.
Zillow experts predict 2021 to be an incredibly strong year for
housing, forecasting 21.9% more sales than last year — the most in
nearly four decades — and home values to rise 10.5% by December 2021.
That growth stems from a unique combination of market
conditions, including extremely low interest rates, a wave of
millennials who are aging into peak home buying years, and people
re-evaluating their housing needs in light of COVID-19 and newfound
freedom to work remotely. The increased adoption of tech tools that
speeds up searching and purchasing also contributes to the
incredibly competitive market.
All of that might seem overwhelming for a buyer trying to
compete for a new home, but this analysis shows why -- for someone
ready to buy now -- it makes more sense to prepare smartly and dive
in soon rather than wait and hope the market slows. The keys are
the combination of home value growth and expected rising mortgage
rates.
Today's average mortgage rate1 is 2.68%
for a 30-year fixed loan. Assuming that rate and a 20% down
payment, the typical home in the U.S. would cost a buyer about
$861 a month, plus taxes and
insurance. But if home values rise 8% and interest rates climb to
3%, the monthly cost of that same house would be $969 a month. At 12% home value growth, the
monthly payment jumps to $1,005. And
if mortgage rates reach 3.5%, the costs grow even more. In more
expensive markets, the difference is hundreds of dollars each
month.
"The best time to buy a home should always be when it's the
right time for your family. However, home shoppers would be wise to
gather as much information as possible and use it to make smart
decisions that maximize their buying power," said Zillow home
trends expert Amanda Pendleton. "For
someone ready to buy, jumping in sooner rather than later could
mean a savings of hundreds of dollars a month. Or, more likely, it
could mean having to make fewer tradeoffs to stay within
budget."
Zillow has tools like mortgage and refinance calculators
that help buyers and homeowners estimate their monthly mortgage
payments and understand how much home value growth and rates can
impact buying power even in the short term. Those and a variety of
other resources allow buyers and current homeowners to easily shop
and compare the best mortgage options available to meet their
unique needs.
The Cost to Refinancing Now Versus Later
For the same reasons, homeowners should consider refinancing
soon, as well. A homeowner refinancing a typical U.S. home
would pay $861 a month after
refinancing at today's average rate. If rates climb to 3%, it will
cost an extra $36 a month. If rates
jump to 3.5% or 3.75%, monthly payments would increase to
$956 and $986 respectively. And in more expensive coastal
markets, the savings easily reaches hundreds of dollars a
month.
"Rates are near historic lows, and we expect rates to hover near
current levels through the first quarter of 2021. Although we
expect rates to slightly increase as the economy recovers from
Covid-19, it remains to be seen when that recovery truly gains
traction. While these rate fluctuations may seem like small
changes, when homeowners do the math it is clear how lower rates
can significantly reduce monthly payments for the life of the
mortgage," said Zillow senior economist Chris Glynn. "Like with any consumer
decision, it is important to be informed, research the market and
shop around to find the best deal possible. Qualified
mortgage professionals can help individual consumers identify the
loan rate, repayment term, and structure that meet their needs."
Monthly Mortgage
Payment Scenarios
|
Metro
Area*
|
Current
Rate (2.68%) &
home value
|
3% Interest
Rate & 8%
home value a
ppreciation
|
3% Interest
Rate & 12%
home value
appreciation
|
3.5% Interest
Rate & 8%
home value
appreciation
|
3.5% Interest
Rate & 12%
home value
appreciation
|
United
States
|
$861
|
$969
|
$1,005
|
$1,032
|
$1,071
|
New York,
NY
|
$1,660
|
$1,868
|
$1,938
|
$1,990
|
$2,064
|
Los Angeles,
CA
|
$2,395
|
$2,695
|
$2,795
|
$2,871
|
$2,977
|
Chicago,
IL
|
$836
|
$941
|
$976
|
$1,002
|
$1,040
|
Dallas-Fort
Worth, TX
|
$876
|
$986
|
$1,023
|
$1,050
|
$1,089
|
Philadelphia,
PA
|
$890
|
$1,002
|
$1,039
|
$1,068
|
$1,107
|
Houston,
TX
|
$740
|
$833
|
$864
|
$888
|
$921
|
Washington,
DC
|
$1,527
|
$1,719
|
$1,783
|
$1,831
|
$1,899
|
Miami-Fort
Lauderdale, FL
|
$1,034
|
$1,164
|
$1,207
|
$1,240
|
$1,286
|
Atlanta,
GA
|
$847
|
$953
|
$988
|
$1,015
|
$1,053
|
Boston, MA
|
$1,735
|
$1,952
|
$2,025
|
$2,080
|
$2,157
|
San Francisco,
CA
|
$3,779
|
$4,253
|
$4,411
|
$4,530
|
$4,698
|
Detroit,
MI
|
$638
|
$718
|
$744
|
$765
|
$793
|
Riverside,
CA
|
$1,385
|
$1,559
|
$1,616
|
$1,660
|
$1,721
|
Phoenix,
AZ
|
$1,063
|
$1,196
|
$1,240
|
$1,274
|
$1,321
|
Seattle,
WA
|
$1,897
|
$2,135
|
$2,214
|
$2,274
|
$2,358
|
Minneapolis-
St. Paul, MN
|
$1,023
|
$1,152
|
$1,194
|
$1,227
|
$1,272
|
San Diego,
CA
|
$2,196
|
$2,472
|
$2,564
|
$2,633
|
$2,731
|
St. Louis,
MO
|
$632
|
$712
|
$738
|
$758
|
$786
|
Tampa, FL
|
$821
|
$924
|
$958
|
$984
|
$1,020
|
Baltimore,
MD
|
$1,025
|
$1,154
|
$1,197
|
$1,229
|
$1,275
|
Denver, CO
|
$1,558
|
$1,754
|
$1,819
|
$1,868
|
$1,937
|
Pittsburgh,
PA
|
$569
|
$641
|
$664
|
$682
|
$708
|
Portland,
OR
|
$1,466
|
$1,651
|
$1,712
|
$1,758
|
$1,823
|
Charlotte,
NC
|
$845
|
$951
|
$986
|
$1,013
|
$1,050
|
Sacramento,
CA
|
$1,537
|
$1,730
|
$1,795
|
$1,843
|
$1,911
|
San Antonio,
TX
|
$712
|
$801
|
$831
|
$853
|
$885
|
Orlando,
FL
|
$884
|
$995
|
$1,032
|
$1,060
|
$1,099
|
Cincinnati,
OH
|
$667
|
$750
|
$778
|
$799
|
$829
|
Cleveland,
OH
|
$562
|
$633
|
$656
|
$674
|
$699
|
Kansas City,
MO
|
$728
|
$819
|
$849
|
$872
|
$905
|
Las Vegas,
NV
|
$1,015
|
$1,142
|
$1,184
|
$1,216
|
$1,261
|
Columbus,
OH
|
$748
|
$842
|
$873
|
$896
|
$930
|
Indianapolis,
IN
|
$655
|
$737
|
$764
|
$785
|
$814
|
San Jose,
CA
|
$4,167
|
$4,691
|
$4,864
|
$4,996
|
$5,181
|
Austin, TX
|
$1,225
|
$1,379
|
$1,430
|
$1,468
|
$1,523
|
Virginia
Beach, VA
|
$846
|
$953
|
$988
|
$1,015
|
$1,052
|
Nashville,
TN
|
$973
|
$1,095
|
$1,135
|
$1,166
|
$1,209
|
Providence,
RI
|
$1,144
|
$1,288
|
$1,335
|
$1,372
|
$1,422
|
Milwaukee,
WI
|
$703
|
$791
|
$820
|
$843
|
$874
|
Jacksonville,
FL
|
$805
|
$906
|
$940
|
$965
|
$1,001
|
Memphis,
TN
|
$555
|
$625
|
$648
|
$665
|
$690
|
Oklahoma
City, OK
|
$547
|
$615
|
$638
|
$655
|
$679
|
Louisville,
KY
|
$635
|
$715
|
$742
|
$762
|
$790
|
Hartford,
CT
|
$837
|
$942
|
$977
|
$1,003
|
$1,040
|
Richmond,
VA
|
$861
|
$970
|
$1,005
|
$1,033
|
$1,071
|
New Orleans,
LA
|
$718
|
$808
|
$838
|
$860
|
$892
|
Buffalo,
NY
|
$624
|
$702
|
$728
|
$748
|
$775
|
Raleigh,
NC
|
$983
|
$1,106
|
$1,147
|
$1,178
|
$1,222
|
Birmingham,
AL
|
$604
|
$679
|
$705
|
$724
|
$750
|
Salt Lake City,
UT
|
$1,386
|
$1,560
|
$1,618
|
$1,662
|
$1,723
|
*Table ordered by
market size
|
About Zillow Group
Zillow Group, Inc. (NASDAQ: Z
and ZG) is reimagining real estate to make it easier to unlock
life's next chapter.
As the most-visited real estate website in the U.S., Zillow® and
its affiliates offer customers an on-demand experience for selling,
buying, renting or financing with transparency and nearly seamless
end-to-end service. Zillow Offers® buys and sells homes directly in
dozens of markets across the country, allowing sellers control over
their timeline. Zillow Home Loans™, our affiliate lender, provides
our customers with an easy option to get pre-approved and secure
financing for their next home purchase. Zillow recently launched
Zillow Homes, Inc., a licensed brokerage entity, to streamline
Zillow Offers transactions.
Zillow Group's affiliates and subsidiaries include Zillow®,
Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow
Closing Services™, Zillow Homes, Inc., Trulia®, Out East®,
StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal
Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
1 As of December 2020
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