With the overall economy just inching along, some experts are questioning whether the housing market can continue its momentum throughout the rest of the year. People are beginning to ask questions such as:
Freddie Mac , in their April Economic Outlook , addresses the disappointing economic news and what impact they think it will have on housing:
“Recent data darkened the growth outlook for the first quarter of 2016. However, despite the disappointing economic reports, we still forecast housing to maintain its momentum in 2016.
We’ve revised down our forecast for economic growth to reflect the recent data for the first quarter, but our outlook for the balance of the year remains modestly optimistic for the economy.”
What about real estate?
Freddie Mac was much more optimistic about housing…
“We maintain our positive view on housing. In fact, the declines in long-term interest rates that accompanied much of the recent news should increase mortgage market activity.”
They went on to conclude:
"We expect housing to be an engine of growth. Construction activity will pick up as we enter the spring and summer months, and rising home values will bolster consumers and help support renewed confidence in the remaining months of this year."
In today’s highly competitive seller’s market where there are more buyers than there are listings for them to purchase, some sellers may feel like the ball is in their court.
And they would be right when it comes to choosing which offer to accept, the closing date, or even which improvements the seller is willing to make to the home prior to selling.
One thing to remember though is that there is always a line that shouldn’t be crossed.
Interest rates could change, financing might not go through, the appraisal might not come back at the price that you have agreed to. These are all opportunities to work with your buyer to make sure that the sale still happens.
You may think that because buyer demand is high right now, that you could choose to make your buyer jump through hoops. But what happens if they reach their limit and need to walk away? You’re starting over… weeks, maybe months later… and other buyers may wonder what’s wrong with the house that the deal fell through.
We were all taught from a young age to “treat others as you would like to be treated”. This shouldn’t change once you have a buyer who seems as though they would do anything to buy your home.
The latest report from Freddie Mac shows that the 30-year fixed-rate mortgage averaged 3.61% last week, slightly down fromthe week before (3.66%), and nearly 20 points lower than a year ago (3.80%).
This is great news for homebuyers who are dealing with rising prices due to a low inventory of homes for sale in many areas of the country. Freddie Mac expressed their optimism for the rates to remain low throughout the spring in a recent blog post :
“We expect mortgage interest rates to stay well under 4% as we head into the heart of the spring homebuying season. We're predicting it to be the best one in 10 years, which should provide even greater opportunities for first-time homebuyers.”
Below is a chart of the weekly average rates in 2016, according to Freddie Mac.
Rates have again fallen to historic lows yet many experts still expect them to increase in 2016. One thing we know for sure is that, according to Freddie Mac , current rates are the best they have been since last April.
Sean Becketti, Chief Economist for Freddie Mac recently explained :
“Since the start of February, mortgage rates have varied within anarrow rangeproviding an extended period for house hunters to take advantage of historically low rates.”
Bottom Line
If you are thinking of buying your first home or moving up to your ultimate dream home, now is a great time to get a sensational rate on your mortgage.
With home prices expected to appreciate by over 5% this year , some are beginning to worry about a new housing bubble forming. Warren Buffet addressed this issue last week in an article by Fortune Magazine . He simply explained:
“I don’t see a nationwide bubble in real estate right now at all.”
Later, when questioned whether real estate and/or mortgaging could present the same challenges for the economy as they did in 2008, Buffet said:
“I don’t think we will have a repeat of that.”
What factors are driving home prices up?
It is easily explained by the theory of supply and demand. There is a lack of housing inventory for sale while demand for that inventory is very strong. According to a recent survey of agents by the National Association of Realtors (NAR), buyer traffic was seen as either “strong” or “very strong” in 44 of the 50 states (the exceptions being: Alaska, Wyoming, North Dakota, West Virginia, Connecticut and Delaware).
Also, in NAR’s latest Pending Home Sales Report , it was revealed that the index was the highest it has been in a year.
What does the future bring?
As prices rise, more families will have increased equity in their homes which will enable them to put their home on the market. As more listings come to market, price increases should slow to more normal levels.
Anand Nallathambi, President & CEO of CoreLogic , recently addressed the issue:
“Home price gains have clearly been a driving force in building positive equity for homeowners. Longer term, we anticipate a better balance of supply and demand in many markets which will help sustain healthy & affordable home values into the future.”
