The news has been circulating for a while. How many times will the Fed raise rates this year? Should I lock in a mortgage rate now? How is the job market doing? Are housing prices going up? No one has a crystal ball no matter how much anyone claims to know, but let’s discuss the mortgage rates trend and how it affects buyers, sellers, and their realtors.
Interest rate increases are a key indicator that the U.S. economy is improving. In fact, low-interest rates reflect a struggling economy. For the last ten years, the recession and stimulus packages from the government have given us a rare period in history. These rates are unprecedented. Even though rates have been low for a while, they need to go up. Increasing rates are a good sign, and we will explain this further.
Jobs Report and Confidence Affect on Mortgage Rates Trend
As mentioned, higher rates mean a more robust economy. Many factors influence mortgage interest rates: stock & bond market, inflation, consumer confidence, world & U.S. fears, and jobs. Market fears such as low confidence, bad jobs reports, or low inflation will lower rates. However, recent jobs report numbers typically push the mortgage rates to trend higher. Past months have shown some impressive numbers. Construction and manufacturing jobs have been an important factor.
Also, it is easy to tell that local through federal level leaders are pushing for a better economy. They want more jobs. There were tax cuts which have promoted businesses to hire and consumers to spend. Success in these and other areas should increase jobs. More jobs and higher pay means more consumer confidence. More confidence is a good thing for the economy and the real estate market. Although, this does mean higher mortgage interest rates.
Mortgage Rates Trend Affect on Real Estate
Will mortgage rates keep rising? Are housing prices increasing? It is decidedly so! And that isn’t just the chance answer of the magic eight ball! Higher real estate prices benefit owners and sellers. If a homeowner decides to sell, there are greater profits to realize. These profits could be used for down payment on a new house, pay off debts, or pay for kid’s college. Currently, the IRS has beneficial rules for owners selling a home and potentially not having to pay capital gains taxes on the profit, but this also means a seller would now be a buyer and would pay a potentially higher price on the new home.
First Time Buyers
Rising prices and rates will also affect first time buyers. As entry level home prices increase, less first time buyers can afford a home, but home prices and rates are not the only factors with millennial buyers.
Student loan debt prevents many millennials from buying. Although they are little known, there are great financing solutions in these cases. These mortgage programs are flexible when it comes to student loans so even though the mortgage rates trend is going up, there is still an opportunity. Home ownership creates wealth. Equity beats renting most of the time.
There are a lot of buyers from the northeast US taking advantage of selling their appreciated home. Then northern sellers relocate to states like Virginia, North Carolina, South Carolina, Florida, and Texas. Many of these buyers either have a job relocation or retire to the south. Because home values are usually more expensive up north, they are able to have larger down payments here. Seniors are often able to use this equity along with a reverse mortgage to buy an affordable home. Other relocating buyers include service members. Appreciating homes allow veterans to sell and hopefully cover their mortgage balance. Then VA eligible buyers may buy another home using a VA home loan.
Many of our local real estate markets are actually doing so well that there is a limited amount of inventory. Therefore, this is another factor that assists owners and sellers. It is a sellers market so buyers must be ready to jump on the right properties, but even buyers could also benefit from this future growth. Building equity not only creates wealth, it creates opportunity. Opportunities are benefits that include:
- Tax deductions
- An eventually, paid off home
- Fixed payments
- Pride in ownership
- You’re the boss
- Use of equity for future needs
Waiting For Rates to Drop?
Again, no one has a crystal ball and practically no one expected rates to stay as low as they did for so long. Rates could possibly go down, but there is a slim chance of that. Rate driven borrowers can actually be their own worst enemy by sitting on the fence. Although, the rate is important, there are other very important factors to include in a mortgage decision.
- Good purchase contract terms
- Closing costs
- Right neighborhood & school district
- House layout for you
- Good houses go fast
Even though we are talking about rising interest rates, they are expected to stay historically low for quite a while. With continued increases on the horizon, it is important to remember we are just above record lows and borrowing costs are very cheap. Although, rates will increase, they are expected to do so at a reasonable pace. Hopefully! When it comes to buying a house, remember all facets of this important decision. The overall picture is key, rather than trying to time the market for a possible rate dip. When you find the right house, you found the right house. Rates are what they are at that time and timing rates is like timing the stock market. That’s a tough one to do.
No Matter The Rates, Ownership is the American Dream
Even though we are mortgage lenders, we do realize not everyone wants to own a home, but ownership does have many perks no matter what the rate is. Even when rates were 15% in the 1980’s, buying a home was still a primary goal for most. Owning a home is a major part of the American dream. Financing dreams is what we love so much about our jobs. Give us a call to discuss if home ownership is right for you. If the mortgage rates trend is going up, it is a good idea to call today. Also, check out the mortgage products that are available to you by choosing “loan programs” at the top of this page.