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There are many people out there who debated purchasing a home over the course of the last year, but ultimately did not. Whatever their reasons were for delaying, let’s look at whether the decision to wait to buy made sense.
The 30 year fixed rate on January 2, 2014 was 4.53% as reported by Freddie Mac. Looking at the chart below, your monthly mortgage payment with principal and interest for a $250,000 home would have been $1,271.17.
Even though interest rates have dropped below 4% and ended 2014 at 3.87%, home prices appreciated by 4.8 percent over the same time according to the Home Price Expectation Survey.
So that same home appreciated by $12,000 and now costs $262,000. The most recent report by Freddie Mac reports the average 30-year fixed rate is currently 3.73%.
Many may say, “See waiting a year made total sense, I’m saving $60 a month.” And they’d be right, over the course of the year they saved $729.36.
But what they haven’t realized, is that as the price of the home they purchased went up by $12,000, even if they just put a down payment of 5%, they had to come up with an additional $600 at the start of the process. So really they’ve only saved $129.36 in a year.
Is a savings of $11 a month really worth holding off on pursuing a home to call your own after you weigh all the benefits that come along with that?
The experts are predicting that homes will appreciate by another 4% and interest rates will increase by a full percentage point by the end of 2015. If you are in a position to be able to buy a home now before these predictions become reality, contact a local real estate professional and start the process.
Kill HOME SALES?
The Mortgage Bankers Association, the National Association of Realtors, Fannie Mae and Freddie Mac are each projecting mortgage interest rates to increase substantially over the next twelve months. What will that mean to the housing market in 2015?
Last week, we posted a graph showing that home prices appreciated each of the last four times mortgage interest rates dramatically increased. Today, we want to talk about the impact higher rates might have on the number of home sales.
The reason many experts are calling for a rise in rates is because they see a stabilizing economy. With the economy beginning to improve, they expect the employment situation to regain some ground lost during the recession, incomes to grow and for consumer confidence to improve.
What will that mean to home sales next year?
In its November 2014 U.S. Economic & Housing Market Outlook, Freddie Mac explains:
“While higher interest rates generally detract from housing activity, when they occur with strong job and income growth the net result can be increases in household formations, construction, and home sales. Our view for 2015 is exactly that, namely, income and job growth offset the negative effect of higher interest rates and translate into gains for the nation’s housing market.”
Even with mortgage rates increasing, home sales and home appreciation should be just fine in 2015.
SEE Triple Crown Realty for more info:
After it was announced that Fannie Mae and Freddie Mac would again make available mortgage loans requiring as little as a 3% down payment, many people showed concern. Were we going back to the lower qualifying standards of a decade ago that caused the housing market crash? Won’t lower down payments dramatically increase the default rates? Will we again be faced with an avalanche of short sales and foreclosures? more…..
Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.