By Mike Bodeen · 4 December 2023
Have Shelter Costs Lowered?
In encouraging news for buyers, mortgage rates have continued moving downward and have hit a 3-month low. Per Mortgage News Daily, the conventional 30-year fixed rate mortgage as of Friday December 1st has dropped to 7.09%. A 30-year fixed rate FHA loan currently resides at 6.5%!
In more good borrower news, conforming loan limits for Arizona have risen to $766,550 for 2024, while FHA loan limits (3.5% down payment) are increasing to $530,150 for Maricopa and Pinal counties.
Rates are still not what they were two years ago, but better than they have been since May of this year. The current direction is very positive.
Shelter Costs Lowering
In the battle against inflation, we hear a lot about “shelter costs” these days, which, along with fuel costs, have contributed hugely to our rising inflation numbers, which has sent interest rates soaring.
There’s good news here. According to the Arizona Regional Multiple Listing Service (MLS), the average monthly lease price per square foot (PSF) has remained pretty level for over 2 years. In September of 2021, the PSF was $1.35. October’s numbers place it at $1.34. Like home prices, rents soared astronomically at the same time.
Current fuel (gas) costs have dropped significantly. Rent prices have remained stable for two years now (see chart below).
But what about the purchase and ownership side of owning a home? We’re all aware of the crazy price increase that started with Covid (January 2020) when the average price for a Phoenix Metro home PSF was $173. Two years later that average sales price PSF skyrocketed to $287 PSF – a 66% increase.
Since last December, the Phoenix Metro market has dropped in value to $280 PSF – slightly over 2%. However, the recent S&P Case Shiller Index is reporting a .54% increase in value since last month as of August 2023.
Though prices could be on the upswing again (anyone’s guess) the bigger point is that house values have leveled off.
These healthier shelter costs (rents and ownership), if they remain as such, may continue to help keep inflation lower, hence mortgage rates lower. And that’s a winner for all!