5 Possible Outcomes of Higher Mortgage Rates

 

At the beginning of May the average mortgage rate for a 30-year FRM was just 3.35 percent. Since then, as tracked by weekly surveys from Freddie Mac, rates have risen aggressively, and as of August 22, the average rate on that same 30-year FRM was 4.58 percent.

Much of the mortgage-rate discussion thus has dealt with numbers, specifically, how much homes sales will be impacted. So for this story, we wanted to take a look at some broader market forces, and how the rising mortgage rates could impact those elements.

1. Housing demand could fall – There are two sides to the housing demand element, both very interesting. On one hand, consumers buy homes with the future in mind, so if mortgage rates appear to be rising, consumers may be incentivized to buy now before rates get any higher. On the other hand, though, the speed in which rates increase also matters, and if rates rise too quickly (as they have the last couple months), they could scare buyers away.

2. New buyers will not arrive – Falling mortgage rates entice many consumers to consider homebuying, but there’s little evidence that rising interest rates have the same effect. Again, consumers who were already considering homeownership may expedite their purchase to lock in low rates, but the renter with no interest in homebuying will not likely follow suit.

3. Rising rates are bad for the high-end and low-end – Both entry-level and affluent homebuyers are most affected by rising mortgage rates. Whereas first-time homebuyers are priced out by rising rates, move-up buyers who were considering homes in the $1 to $2 million range may forgo a new purchase and decide to renovate their existing residence instead. According to a recent analysis by the Wall Street Journal, the monthly payment on homes with a 10 percent downpayment has gone up by 13 percent with the rate increases.

4. Investors are in a quagmire – Though many investors, noted the Journal, may be excited by the rate increases, given that they eliminate many potential competitors by making home purchases more costly, some may also be turned off by the increases, especially with how difficult it has now become to find the ridiculous bargains of 2009 and 2010.

5. The housing rebound will not end – Some spectators have feared that the rising mortgage rates will prematurely end the housing rebound, but that will only happen if rates continue to rise at their mid-summer pace, which is unlikely. Instead, what we’ll probably see is a slowdown of home prices, and a return to the steady, consistent growth that has typically categorized the housing market.

                                                                                                                                                                                                                                                                                                                                                                      by Peter Ricci

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Housing Market Index Continues To Grow

According to the Home Price Index, the United States housing market had a strong first quarter in 2013, showing signs of growth the last 21 consecutive months. Additionally, home values have also increased approximately 7% from last year nationwide due to buyer demand and low mortgage rates. Home values have grown around 2% between January 2013 and March 2013, and many experts expect the growth to continue over time. More here

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2013 Home Prices Continue To Increase

According to the S&P/Case-Shiller Home Price Indices, home prices grew impressively in January. The 20-city home price index grew by 8.1% from January 2012-January 2013. S&P Dow Jones chairman of the Index Committee David M. Blitzer said, “economic data continue to support the housing recovery.” Blitzer also stated ““single-family home building permits and housing starts posted double-digit year-over-year increases in February 2013. Despite a slight uptick in foreclosure filings, numbers are still down 25 percent year-over-year.” More here

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Should You Purchase A Home???

There are many factors taken into account when thinking of purchasing that dream home.

According to studies, home purchases have increased substantially in the last 12 months.

In many areas, it is now cheaper to own a home than it is to rent.  read more

Rates are at an all time low but we know this will not last.  I already have witnessed an increase in rates and tightening in credit qualifications

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FHA Mortgage Premiums To Increase!

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Pending Home Sales Up In September

The National Association of Realtor’s Pending Home Sales Index measures contract signings and is an indicator of future existing-home sales. In September, the index was up 0.3 percent over August and 14.5 percent above last year’s level. It was the 17th consecutive month of year-over-year improvement. Lawrence Yun, NAR’s chief economist, said home contract activity remains at an elevated level when compared to recent years and should continue its upward trend in 2013. Pending home sales were up in every region of the country and are showing double-digit increases over last year in the Northeast, South, and Midwest. According to the NAR, existing-home sales should close 2012 at 4.6 million, which is an increase of 9.0 percent over 2011. More here and here.

 

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Existing Home Sales Surge In August

Sales of previously owned homes spiked 7.8 percent in August, according to the National Association of Realtors. Total existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops, rose to a seasonally adjusted annual rate of 4.82 million from 4.47 million in July. The gains put sales 9.3 percent higher than year-before levels and mark the sixth-straight month of improvement. Lawrence Yun, NAR’s chief economist, said the housing market is steadily recovering, with consistent increases in sales adding to the evidence that more buyers are taking advantage of excellent housing affordability conditions. The national median existing-home price for all housing types was $187,400 in August, which is 9.5 percent higher than a year ago. At the current sales pace, there was 6.1-month supply of homes available for sale at the end of August. More here and here

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Economic Outlook Calls For Housing Growth And Improvement

The latest 2012 Economic and Housing Outlook from National Association of Realtors’ chief economist Lawrence Yun calls for modest economic growth and continued improvement for the housing market. Yun’s forecast says, though real GDP growth was 1.5 percent in the second quarter, it will grow at near 2.0 percent for the rest of the year. And though that is still below the historical norm of 3.0 percent a year, it is an improvement over 2011. Housing starts are forecast to rise by 27 percent this year, with a jump of nearly 50 percent in 2013. Yun also expects continued gains for both new and existing home sales. So far this year, existing home sales have been nearly 8.0 percent above last year, while new home sales are up nearly 20 percent. According to the NAR’s expectations, new home sales will hit 600,000 by 2013 and existing home sales will rise to nearly 5 million next year. The forecast also calls for a continued decline in distressed properties and increasing median home prices. More here

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Pending Home Sales At Two Year High In July

The National Association of Realtors’ Pending Home Sales Index is a forward-looking indicator that measures the number of signed contracts that occur each month. In July, the index rose 2.4 percent, reaching a two-year high and climbing 12.4 percent over year-before levels. Lawrence Yun, NAR’s chief economist, said the index is now at its highest level since April 2010 and, though month-to-month movement has been uneven, there have been 15 consecutive months of year-over-year gains in contract activity. Regionally, pending sales were up across the country, with double-digit improvements in the Northeast, Midwest, and South over last year’s estimates. The NAR projects existing-home sales will rise between 8.0 and 9.0 percent this year, with an additional 7.0 or 8.0 percent improvement in 2013. More here and here.

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