66 KIPLINGER’S PERSONAL FINANCE^ 04/2020
are reaping the rewards. Home values
climbed in 2018 before hitting the
pause button starting in spring 2018
because of higher mortgage rates.
But home price gains picked up in
the second half of 2019 as mortgage
rates retreated again. The median
price of existing homes depends on
who’s calculating it. According to
Attom Data Solutions, a property
database provider, the median home
price increased 6.2% in 2019, hitting
an all-time high of $258,000. Accord-
ing to Clear Capital, which supplies
average home prices for metro areas
across the U.S., home prices rose 5.7%
in 2019, compared with an increase
of 7.4% in 2018. Clear Capital says
the median sales price of a residential
property was $253,000 in December- (For home prices in the 100 larg-
est cities, see the table on page 69.)
How high will home prices go this
year? Kiplinger expects a 3.6% rise
in 2020. December marked the sixth
consecutive month of year-over-year
increases, reversing the trend of de-
celerating price growth that began in
March 2018 and ended in July 2019.
Home prices are nearly 60% above the
bottom they hit in February 2012 and
are now 15% above their pre-crisis
peak, on average.
Frank Nothaft, chief economist
at financial data and analytics firm
CoreLogic, is more optimistic, with
a price-increase forecast of 4.6% for - “We’re predicting 2% economic
growth this year, which is slightly
slower than the past couple of years
but still sufficient to create enough
jobs to stimulate the housing market,”
Nothaft says.
Assuming that mortgage rates stay
below 4%—the 30-year fixed-rate
mortgage was recently about 3.5%,
according to Freddie Mac—lower-
priced homes will continue to appreci-
ate faster than higher-priced homes,
says Mike Fratantoni, chief economist
at the Mortgage Bankers Association.
After years of sluggish growth, the
supply of newly built homes is picking
up. Robert Dietz, chief economist at
up home prices and putting pressure
on housing affordability, says George
Ratiu, Realtor.com’s senior economist.
For about one in four home buyers
in 2019, the home-search process took
more than a year, Realtor.com found.
“The housing shortage is brutal,” says
Matt Parker, a Seattle real estate agent
and author of Real Estate Smart: The
New Home Buying Guide. “Buyers can
go months without looking at any new
properties.”HIGH DEMAND,
HIGHER PRICES
While buyers are dealing with limited
supply, home sellers—and homeowners
with no plans to move anytime soon—millennials entering their thirties and
“approaching peak home buying ages.”
(According to a recent report from the
National Association of Realtors, the
median age of first-time home buyers
is 33.)
Furthermore, a large cohort of
baby boomers are buying and selling,
as many boomers downsize for retire-
ment. Adding to the big squeeze on
buyers is a huge housing shortage: The
number of homes in the U.S. listed for
sale on Zillow in December was down
7.5% from the previous year and is at
the lowest level ever recorded by the
company. The U.S. housing market is
facing an undersupply of homes for
sale of 3.8 million, which is drivingREWARDS
Mortgage OutlookShould You Refinance?
Mortgage rates are at three-year lows. The average rate for a 30-year fixed-rate mortgage
was recently about 3.5%, according to Freddie Mac—down about one percentage point from
the year before. The average rate for a 15-year fixed-rate mortgage was recently 3%. Is now
the right time for you to refinance?
In 2019, buyers and refinancers took out more home loans than in any year since 2006,
according to industry research group Inside Mortgage Finance. The reduced rates widen the
pool of homeowners who could lower their monthly payments. Mortgage-data firm Black
Knight Inc. estimates that 11.3 million U.S. homeowners would qualify for and benefit from
a refinancing, the second-most on record. Average monthly savings would be $268.
If it has been several years or more since you bought your home or since you last refi-
nanced, there’s a good chance your mortgage rate is more than one percentage point above
current rates, which is usually a sign that it makes sense to refinance. But you may benefit
from a refi even if your new rate would be less than a full point lower. It depends partly on
how long you plan to stay in your home and how long it would take to recoup closing costs.
Keep in mind that closing costs for refinancing will typically run between 3% and 6%
of your new loan amount, so knowing when you plan to sell your home is essential. Say you
have a $300,000, 30-year, fixed-rate loan at an interest rate of 4.4% that you took out in
2014, and you’re making a monthly payment of $1,688 a month in principal and interest. If
you refinance to a 30-year loan with an interest rate of 3.0% and closing costs of 3% and fi-
nance the closing costs, you would lower your mortgage payment to $1,303, saving you $385
per month. You could break even and begin saving after a bit more than three years. If you
sold your home in 10 years, you would save a total of $17,457.
If you have a 30-year loan but plan to sell your house in a few years, refinancing to a
five- or seven-year adjustable-rate mortgage (ARM) could enable you to save even more
money. You could also choose a no-cost refinance, in which your mortgage lender pays the
closing fees, but that would require you to pay a higher interest rate.
Need help crunching the numbers? Use The Mortgage Professor’s refinance calculator
(www.mtgprofessor.com) to enter the details of both your current mortgage and your new
loan to see how long you’d have to stay in your home to start saving money on a refi.