Will homeownership be possible in 2023? 57% increase in mortgage payments.
Making Sense of the Numbers
Let’s make sense of the numbers. To consistently track housing trends, let’s use the typical home value of an area, or the Zillow Home Value Index (ZHVI). The typical home value is different from the median home value, in that it reflects the 35th to the 65th percentile range of home values. This is your middle-of-the-road home, excluding any outliers. Sorry, but Yankee Star Jorge Posada’s $20,000,000 Florida Mansion won’t be included in these statistics. It never hurts to check it out, though – Jorge Posada’s FL Mansion Hits the Market.
What this means for Ohio residents
Let’s get local. According to the Housing Data provide by Zillow, Ohio’s typical home value for August 2022 was $213,335, compared to $188,660 in August of 2021 – over a 13% increase.
How does this compare to other markets?
In California, the typical home value in August of 2022 was $775,876 while August of 2021 was $697,149 – an increase of 11.29%.
In Illinois, the typical home value in August of 2022 was $267,079 while August of 2021 was $238,801 – an increase of 11.84%.
Mortgage rates are also on the rise. Freddie Mac (FHLMC) is expressing rates as high as 6% for the first time since 2008.
Current Mortgage Rates – Freddie Mac
Mortgage lenders are screaming that rates are still at an all-time low. So, what exactly does this mean for home buyers – is it time to buy, or wait until price corrections and 3% interest rates are the norm again? It’s no time to sit on the edge of your seats. Interest rates are not expected to dip anytime soon. According to historical trends, interest rates on a 30-year mortgage should hover, with small and incremental changes through 2022 and 2023. Compared to 1981, where home buyers were locking in at interest rates skyrocketed over 18%, it’s still a fantastic time to discuss your options with a lender. There is always a deal to be had.
Historic Mortgage Rates – Freddie Mac
Effects of Rising Rates & Increasing Sale Prices
How much have monthly mortgage payments increased? The typical home value in Dayton, Ohio for the month of July, 2022 was $190,327. The median sale price in Dayton, Ohio for the month of July, 2022 was $196,500. This tells me home are still selling for more than the typical valuation, but not aggressively as previously seen [read: bidding wars]. The typical home value is a snapshot in time for the overall values of house in the area, whether they are for sale or not. The median sale price is calculated using the actual raw data of all homes sold in an area at a given period in time. To calculate the difference in affordability, let’s make the following assumptions:
Sale Price: $196,500
Mortgage Amount (20% Down Payment): $157,200
Mortgage Rate: 6%
Loan Term: 30 Years
With these assumptions, we can reasonably conclude that median monthly payment on a mortgage will be $942.
What would this have looked like in July of 2021? The typical home value in Dayton, Ohio for the month of July 2021 was $168,552. The median sale price in Dayton, Ohio for the month of July of 2021 was $180,000. Remember, we’re using median sale price, because that’s the most reasonable value to use when predicting what your purchase price would have been at this period in time. The assumptions for purchasing in July of 2022 go as follows:
Sale Price: $180,000
Mortgage Amount (20% Down Payment): $144,000
Mortgage Rate: 2.88%
Loan Terms: 30 Years
With these assumptions, we can reasonably conclude that your monthly payment will be $598.
Check out Google’s Mortgage Calculator Tools to give you a general understanding of your affordability and predicted payments.
The difference in your monthly mortgage payment based on median sale prices and increased interest rates from July of 2021 to July of 2022 is $344. This is over a 57% increase! With a median household income of just under $35,000 in Dayton, Ohio, we can assume this increase could push many away from the idea of homeownership.
Is homeownership still in your future? Many homeowners are sitting tight and waiting for 2023 to bring us new opportunities. Write to us and we’ll be happy to connect you with a local real estate expert and mortgage loan officer so you can explore your possibilities for homeownership.
Brody Woehl is the Business Development Manager for MVP Inspectors and MVP Upkeep. By providing knowledge and resource to the local Miami Valley communities in Ohio, MVP Inspectors and MVP Upkeep have established themselves as the authority for real estate inspections and market trends.
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