SAN DIEGO — Mortgage rates are showing a downward trend, which is encouraging news for people looking to buy. CBS 8 is working for you to crunch the numbers on how much these lower interest rates can save you on a monthly payment.
“This is good news. This is what we’ve been waiting for, I’d say for the last year-and-a-half,” said Heather Wendlandt, a real estate agent with Team Kolker at Compass.
Will 2024 be a good time to buy a house?
She tells CBS 8 that falling mortgage rates are sparking optimism among homebuyers.
“It’s a very anemic housing supply right now, and with the rates lowering, it’s just going to get buyers who have been sitting on the fence, buyers who have been sitting and waiting, it’s going to motivate them to jump in the market,” said Wendlandt.
“It’s going to motivate sellers to say, ‘Ok, now I can move up. Now I can move to wherever I’m going to go.’ It’s just going to create more inventory. With more inventory, we’re going to get more buyers, and it’s just going to start to move the market.”
Are home prices declining in San Diego?
Don’t be fooled. More inventory doesn’t necessarily mean we’d see a drop in home prices in the San Diego market.
“People might be thinking, ‘Great, prices will go down,’” said Wendlandt. “If we look at the past, if you remember when interest rates went down, prices went up, so I’m pretty sure, my estimate is that prices are going to go up.”
We’ve seen a steady decline over seven consecutive weeks from a high of around 8.0% in October to now falling below 7.0%, not only encouraging potential buyers, but causing current homeowners to think about refinancing.
“We’re starting to see more inquiries from people who have purchased this year and are thinking, ‘Is now the time? Can I finally drop my interest rate that I have?’” said Sheri Arnold, branch manager for Fairway Independent Mortgage.
According to her, the Federal Reserve Board’s expectations to lower the federal funds target rate next year is having an effect on mortgage rates.
“The Fed is finally saying, ‘Hey, we’re projecting that we might consider dropping interest rates, maybe upwards of three times,” said Arnold. “As they’re doing that, that’s basically going to lower that pressure that we’ve seen on mortgage interest rates.”
How much is a typical mortgage monthly payment?
Day-to-day interest rates can be a moving target, but according to Freddie Mac, the national weekly average for a 30-year fixed is 6.95% as of December 14, the first time rates have dropped below 7.0% since August.
“We’re below 7.0%, just a little bit, and there’s a lot of factors in there. People have different qualifying criteria and that can affect the interest rate,” said Arnold.
Let’s break down the difference in monthly payment with the lowered interest rate.
If you were to buy a townhome at $750,000 with a 20% down payment, your loan for $600,000 at an 8.0% interest rate, like we saw in October, would give you a monthly payment of $4,403. But at a 6.95% rate, that’s $3,972, a savings of $431/month.
Or let’s say you were buying a single-family home priced at $1.2 million with 20% down. Your monthly payment at 8.0% would’ve been $7,044. But at the 6.95%, it’s $6,355, a savings of $689/month.
“It’s really significant, so what we’re seeing now is just kind of the tip of the iceberg," said Arnold. "I feel like we’ve crested to where we’re going to be, and I think we’ve got really good things ahead.”
WATCH RELATED: Mortgage rates hit 8%, the highest since August 2000