In the olden days right after World War II when houses were coming out of the ground like spring flowers, homebuyers were typically in their 20s and fully intended to pay off their mortgages. Now, however, the median age of buyers has reached an all-time high of 40 and many will not likely outlive their mortgage.
The White House is working on a plan to introduce a 50-year mortgage to make it easier for Americans to afford homeownership. It’s true that a 50-year mortgage would likely make it easier for buyers to qualify for a home loan. In these high interest, low inventory times, it’s something that will have a lot of appeal to buyers who can’t find any other way to afford a home.
Based on a $400,000 purchase with 20% down and a 6.22% mortgage rate, Freddie Mac estimates the difference between a 30-year mortgage and a 50-year mortgage is about $200 a month. This lower monthly payment will qualify many buyers who otherwise wouldn’t qualify for a loan to finally get into their own home.
It’s one of those “looks great on paper” theories, but is full of danger and buyers who end up being financially overextended. Home mortgages are generally front-loaded with interest at the beginning of the loan term so building equity in the early years of ownership is difficult. Since 50-year mortgages will likely be offered at a higher interest to offset the credit risk to the lender, this will make building equity almost impossible.
For buyers who are still in their 20s and plan on living in a home for a long time, the case can be made that this is a good choice. But as stated, buyers are older now, jobs may not be forever, and marriages and partnerships come with a high rate of breakups. Nevertheless, a 50-year mortgage could be just the right option for buyers who are very confident in their life choices and are able to live conservatively to overcome future bumps in the road.
Last week, we published the October sales statistics, which were all positive numbers compared to last year. However, the numbers were skewed because of the negative effect of the hurricanes in 2024.
However, the national sales also rose to an eight-month high in October, helped by the small decline in interest rates. The national median existing home price in October rose to $415,200, a 2.1% increase from a year earlier, according to the National Association of Realtors (NAR). As a comparison, Manatee County’s median single-family home sale price this year was $481,000, an increase of 0.2% from last year. The NAR also reports that prices are falling in some southern and western markets, giving buyers more of a negotiating edge.
In spite of buyers having an increased level of comfort in the market, Redfin reports that there are more than a half-million more sellers than buyers in the national housing market in October. This is the biggest gap on record going back to 2013.
Many old homes in the Northeast have a “mortgage button” embedded in the newel post of their stairway. The tradition is that when the mortgage is fully paid, the wooden button is replaced with an ivory one so everyone coming into the home knows the home is mortgage free… a nice tradition that unfortunately we won’t be seeing much of in decades to come.
