Today’s mortgages rates while historically low than two decades ago continue to throw uncertainty over homebuying prospects in 2017. It’s a given that mortgage rates and mortgage payments go together but as to how the monthly payment will change depends on where the home is located.
As the National Association of Realtors’ recent economic research shows, homebuyers in five counties will pay more, even the most, as a result of the mortgage rate spike.
Of Mortgage Rates 3.5%, 4.2% and 5.0%
The 30-year fixed-mortgage rate was 4.2% in December, the highest it reached for 2015 and 2016, noted NAR’s Research Economist Nadia Evangelou. The 30-year rate stayed above the 4% mark in the succeeding months and tumbled slightly 10 weeks after the November elections.
In calculating the difference in payments the rising mortgage rates brought with them, NAR used the rate of 3.5% prevalent months ago, the rate of 4.2% in early January, and the rate it projects within the next two years of 5%.
On a nationwide basis, NAR found that the rise of mortgages from 3.5% to 4.2% results in a monthly payment increase of $75. Meanwhile, a jump in rates from 4.2% to 5.0% will signify a $90 increase in monthly mortgage payments.
The actual difference in mortgage payments varies among counties, i.e. areas with high or low median house prices.
For example, at expensive markets like San Francisco, home buyers are seeing an increase of $375 in monthly payments at current rates and if they were at 5%, the difference could well be $447 based on NAR’s tool.
On the other hand and at the lower end of the spectrum, homebuyers at Hudspeth, Texas are paying $211 at the current rate and will likely see a $21-increase in monthly payments if rates hit 5%. Still the results are miles away from the $450 in estimated monthly payments in San Francisco.
Top 5 High and Low Counties
According to NAR’s research, homebuyers at these counties are paying or will pay more at rates current and projected:
| County | Monthly payments at selected rates | ||
| at 3.5% | at 4.20% | at 5.0% | |
| San Francisco (CA) | $4,199 | $4,573 | $5,020 |
| San Mateo (CA) | $4,093 | $4,458 | $4,893 |
| Marin (CA) | $4,044 | $4,404 | $4,834 |
| Nantucket (MA) | $3,954 | $4,306 | $4,727 |
| Santa Clara (CA) | $3,718 | $4,049 | $4,444 |
Meanwhile, here’s what homebuyers at these counties will pay at current and projected rates:
| County | Monthly payments at selected rates | ||
| at 3.5% | at 4.20% | at 5.0% | |
| Cochran (TX) | $147 | $160 | $176 |
| McDowell (WV) | $153 | $167 | $183 |
| Hall (TX) | $166 | $181 | $198 |
| Zavala (TX) | $190 | $207 | $228 |
| Hudspeth (TX) | $194 | $211 | $231 |
Higher Monthly Housing Costs
The above results use the median price of homes in those areas as of the third quarter of 2016 and with a down payment of 10%.
NAR projects that home prices will rise to 3.9% in 2017 and 3.2% in 2018, along with the projected rise of the 30-year mortgage rate to 4.4% and 4.8% in 2017 and 2018, respectively.
“Rising prices in addition to rising mortgage rates will push the monthly cost of housing up even higher for new homebuyers.” Ms. Evangelou wrote.
Still, even on a median-priced home, homebuyers at the least expensive counties will significantly pay less compared to those buying homes in the more expensive areas, as MarketWatch pointed out.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.
