OfflineWe recently profiled a few expected trends in real estate for 2014 across the nation. While these trends will undoubtedly play a role in real estate, particularly for investors, one important trend wasn’t mentioned – the steady rise in mortgage rates.
Only a couple of years ago, we saw mortgage rates hit record lows. Now, the current rate for a 30-year fixed rate mortgage is 4.50%, and experts predict this figure, by the end of 2014, could hit 5% and beyond.
Naturally, this bothers some investors and buyers. Experts are already predicting that higher mortgage rates will put a damper on the recovery. It makes sense; a monthly payment for a $200,000 house rises by $120 as you go from 4.5% to 5.5%.
That, however, will not mean the recovery will be stalled. We expect 2014 to be a good year for real estate regardless, for the following reasons.
Mortgage Rates Will Still Be Incredibly Low
Even if rates rise to 5.5% by the end of the year, as some predict, some perspective is required: that is still far below 9.2%, which was the 36-year average from 1972 to 2008.
We’ve never been in such a prolonged period of ultra-low mortgage rates. Buying a home for 5.5% is still far better than buying for 6.41%, the average rate for 2006. Or 8.05%, the average for 2000.
Buyers Who Missed the Boat Will Jump On It Now
Even though rates were between 3% and 4% for the past two years, many buyers couldn’t take advantage. Some still couldn’t qualify; some couldn’t afford it due to unemployment; some were still dealing with underwater homes.
But since then, unemployment has fallen and the number of underwater homes has dropped significantly, mostly due to rising home prices. This could encourage a lot of buyers who either weren’t able to buy or were on the fence about buying to step up to the plate and buy this year.
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Thanks for sharing
Reynold Orozco
Interest rate pricing was all over the place last week. On Monday, interest rates hit their lowest levels in about 3 months. Interest rates went higher the rest of the week until the January employment report was released on Friday. For the third month straight, job creation was lower than forecasts. This would normally cause a big movement for better interest rates but the improvement wasn’t as much as expected.
Overall on the week, the Mortgage Backed Security market traded lower – 6 bps. When the dust settled, interest rate pricing remained in a narrow range and mortgage interest rates are basically where they were at the beginning of last Monday.
In 2014, interest rates have fallen at some of the fastest levels in the past 2 years. The main reason is usually interest rate pricing fluctuates more going up and down, but interest rates have improved for 5 week straight weeks before last week.
There is some concern that the lower trend has come to an end with the market not moving as much as expected with a poor employment report. It’s tough to call right now, but I see interest rates remaining fairly stable for the time being. There is still a limit to how much interest rates can really improve with the FED tapering. The interest rates in the low 3%’s won’t be back, but you could see interest rates going a little bit lower than today’s levels.
This week Janet Yellen will make her first testimony to Congress. Not much new information is expected to be deemed from this testimony, but it will be her first time before Congress as the new FED Cheif.
Have a great week!!
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15 Year Fixed at 3.5% with 0 points
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TODAY’S RATES:
30 year fixed: 4.25% – .8 points, 4.5% – 0 points, 4.625% – $0 costs
20 year fixed: 4% – 1 point, 4.25% – 0 points, 4.375% – $0 costs
15 year fixed: 3.375% – .38 points, 3.5% – 0 points, 3.625% – $0 costs
10 year fixed: 3% – .66 points, 3.25% – 0 points, 3.5% – $0 costs
5/1 ARM: 2.75% – 1 point, 3.125% – 0 points, 3.5% – $0 costs
7/1 ARM: 3.125% – .88 points, 3.375% – 0 points, 3.625% – $0 costs
30 year fixed FHA: 3.75% – .6 points, 3.875% – 0 points, 4.125% – $0 costs
15 year fixed FHA: 3.25% – 0 points 3.5% – $0 costs
30 year fixed VA: 3.75% – .42 points, 3.875% – 0 points, 4.125% – $0 costs
Today's Interest Rates - February 10th, 2014
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INTEREST RATE PRICING STAYS IN NARROW RANGE. rgreen