The above table† illustrates that interest rates as of August 2023 are not significantly far from the average rate during the 2000s, and are also holding lower than they were in the 1980s and 1990s.
One report released for Q3 of 2021 showed that homeowners gained an astounding $3.2 trillion of collective home equity—an average of $56,700 per borrower—from the same time one year prior.4 While this financial windfall couldn’t be expected to continue trending upward with such indefinite velocity, it nevertheless suggests homeownership shows strong long-term financial potential when you look beyond current conditions and short-term trends in the market.
This is especially important to think about for first-time buyers, considering the average rental increase of a single-family home in the United States peaked at a whopping 16% year-over-year in February 2022. Despite these increases slowing down more recently, rental rates continue to trend upward; in August 2023, asking rents increased by an additional 3.3% from the same month one year prior. Average asking rent in the U.S. has exceeded $2,000 per month,5 100% of which is paid to a landlord and never seen again. This is in contrast to monthly mortgage payments, some value of which homeowners can hold onto in the form of increasing home equity over time.
Unfortunately, there remain buyer frustrations in the market. Housing inventory is holding low; one June 2023 report estimated a total inventory decrease of 4.6% over the course of 2023.6 Rather than house hunting in a market characterized by low inventory, many buyers are choosing new construction to build their dream homes with construction-to-permanent home loans. This offers buyers a way to secure financing for a new build, which then converts into a permanent mortgage upon completion. These loans have many benefits for buyers who want to go in this direction:
- One set of closing costs. Most mortgages don’t cover the cost of construction, meaning a buyer has to go through the borrowing process twice. One loan saves buyers both time and money, with one set of closing costs.
- Protect against potential changes in the market. Buyers who take on new construction projects run the risk of a fluctuating market during the build. With a construction-to-permanent loan, the interest rate for the long-term mortgage is locked in before a buyer begins work.
- Give buyers the homes they truly want. The ability to customize every square foot of a house gives buyers the freedom to craft their home to their liking.
We may have the perfect loan for you. No matter how the market looks, Wintrust Mortgage offers lending in all 50 states with a wide selection of mortgage products— including exclusive loans that aren’t available elsewhere—to help you find the perfect solution based on your individual needs. Many products also include down-payment assistance and other incentives for qualifying homebuyers, including grants and tax credits, so you can widen your search to cover as much of the available inventory as possible.
The best way to get started is by becoming a Premier Buyer.†† This gives you a better idea of what you can afford, and saves you time when you start house hunting. Plus, Premier Buyers are more attractive to sellers by proving one is both serious about a prospective purchase and more likely to be able to financially follow through. Wintrust Mortgage offers an online application to become a Premier Buyer that’s fast, easy, and secure.