The Importance of Timing in Buying
In many ways, becoming a homeowner is about timing. As a prospective buyer, you should be concerned not only with the range of choices you have for homes, but also whether you should buy at a particular point in time. The real estate market is anything but stable; we saw that most tragically in the housing crisis of 2008. Timing can impact the options you have to select from. If you’re not finding exactly the kind of property you want, you may want to take a break and return to the market at another juncture. If you simply play the waiting game, you may be able to put time on your side and increase your choices by simply entering the market at a later date. Timing can also affect the rates at which you’ll pay. If you’ll be obtaining a mortgage, you may be aware that rates can vary across time. This means that, if you enter the market at an inopportune moment, you can quite literally end up losing money from your pocket.
Mortgage rates continue to drop in the State of Washington. The question then becomes: is now a good time for a buyer to enter the market? In this post, we will look at the data on mortgage rates and get a concrete sense of what’s going on in recent months. We will look at how averages differ by area. Then, we will discuss in more detail the kind of financial impact which differential mortgage interest rates can have a person’s pocketbook. Finally, we will conclude by taking a glance at the other factors which you should consider when thinking about buying a home in 2019.
To recap, we will cover:
- Current average mortgage interest rates in Washington State
- Current averages for 30-year fixed-rate mortgages according to area
- The financial impact of differential interest rates
- Other factors which can impact your decision to buy or not buy
Current Mortgage Rates in Washington State
So far, in 2019, mortgage rates continue to drop. In Washington, the current average interest rate for a 30-year fixed-rate mortgage is 4.43%. For a 15-year fixed-rate mortgage, the average interest rate is 3.95%. The typical 5/1 adjustable-rate mortgage (ARM) has an average rate 4.00%. These values represent the averages for a $200,000 loan with a down payment of 20%.
As noteworthy as these numbers may be, prospective buyers should be equally intrigued by how these rates have fluctuated. Over the past 3 months, the average rate for a 30-year fixed-rate has dropped by 0.29%. For 15-year fixed-rates, the average declined over that same time period by 0.34%. For the ARMs, the average declined by 0.09%. This is good news for prospective buyers.
Quick Comparison of Rates by City
The data above are for statewide averages across Washington State. Prospective buyers rarely consider every area within the state to be a potential market for their home purchase. Buyers typically focus in just one or a few areas. And for this reason it makes sense to disaggregate the data a bit further by region. Currently, Washington’s major areas show small but noteworthy differences in average interest rates. The more important point of variation was in median home values, however. These areas show wide discrepancy in current median home values.
In the Seattle-Tacoma-Bellevue, the current average mortgage interest rate is 4.53%. In the Spokane region, it’s 4.56%. In Olympia-Tumwater, it’s 4.48%. And for Bremerton-Silverdale, it’s 4.51%. All of these figures are averages for 30-year fixed-rate mortgages with down payments of 20%. Again, these differences are small, but may still translate into significantly different payment amounts depending on property values.
Mortgage Rates Have Huge Financial Impact
Mortgage rates have a critical impact on a buyer’s financial situation. This is true regardless of exactly what type of loan the buyer obtains or whatever the exact goals that buyer may have. If a buyer’s goal is to minimize interest over the full life of a mortgage, then clearly a fixed-rate mortgage with a lower interest rate is more desirable. If the buyer’s goal is to obtain a lower monthly payment on a short-term basis and then sell the house at a profit, then an ARM loan may be preferable. A buyer can obtain lower monthly payments with an ARM loan in the short-term and then dispose of the property before higher payments would kick in.
Let’s consider a quick example to demonstrate the savings in interest for a long-term loan. Let’s suppose that you’re purchasing in the Seattle-Tacoma-Bellevue metropolitan area and you receive a 30-year mortgage with an interest rate of 4.53% (the current average for this area). If you obtain a loan for $300,000, you’ll be facing monthly payments of $1,525 and a total payment of $549,147. If we adjust this rate only slightly, we can see the huge impact these rates can have. If we adjust the rate to 5%, the monthly payments jump to $1,610 and a total payment of $579,767. This translates into differences of $85 per month and over $30,000 in total. Those are big differences when you consider that the rate was adjusted by less than half of 1%.
Interest Rates Affected by Credit History
Although statewide interest rates have dipped in recent months, it’s important to understand the individualized nature of the situation. The credit history of a buyer will play a substantial role in determining the interest rate in a given case. This is something every prospective buyers needs to keep in mind. If you have less than ideal credit at the present moment, then you may want to delay buying so that you can improve your credit and obtain more favorable rates at a later point in time.
In addition to credit history, other factors should also be taken into consideration. Property selection is one factor; home price trends are another. If you’re not finding the right home for you, you may want to step out of the market and return at a later date. The market in your area of interest may have better inventory when you check back. Price trends in your area of interest should also be considered. Are prices going up, staying the same, or going down? These trends should also be weighed against your personal goals. If you’re planning to buy and remain in your home for the long haul, short-term price fluctuations may have less impact on your decision-making.
To sum things up, the recent data on statewide average mortgage interest rates are encouraging. We’ve seen steady drops in the past several months on various types of loans. However, different areas show different rates of change, and have different averages. Prospective buyers need to consider their particular goals and consider their present credit to determine whether now is the right time to buy. For many, these rates may very well mean that now is the right time to buy. If you’d like to move forward with applying for a loan, you can Apply Now to explore your options.