Is 2017 the Year to Move Up to Your Dream Home? If So, Do It Early!

If you are considering moving up to your dream home, it may be better to do it earlier in the year than later. The two components of your monthly mortgage payment (home prices and interest rates) are both projected to increase as the year moves forward, and interest rates may increase rather dramatically. Here are some predictions on where rates will be by the end of the year:

Freddie Mac

While full employment and rising inflation are signs of a strong economy, they also have the potential to push mortgage rates and house prices up. The higher rates and higher prices create significant affordability concerns, which may continue to characterize the housing market for the rest of 2017.”

Lynn Fisher, Vice President of Research & Economics for the Mortgage Bankers Association

By the time we get to the fourth quarter of this year, we will still be under 5 percent – we are thinking 4.7 percent…Something north of 5 percent by the time we get to 2018, and by the time we get to 2019, we show fourth-quarter rates hitting 5.5 percent.”

Mark Fleming, First American’s Chief Economist

Despite some regional disparities, title agents and real estate professionals do not expect increasing mortgage rates to have a significant impact on the housing market this spring. Continued good economic news, increasing Millennial demand and confidence that buyers will remain in the market even if rates exceed 5 percent bode well for 2017 real estate.

Len Kiefer, Deputy Chief Economist for Freddie Mac

We will probably see rates higher at the end of year, around 4.5%.”

Bottom Line

If you are feeling good about your family’s economic future and are considering making a move to your dream home, doing it sooner rather than later makes the most sense.

 

Posted by The KCM Crew

Buying Remains 36% Cheaper than Renting!

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers actually show that the range is an average of 5% less expensive in Orange County (CA) all the way up to 46% in Houston (TX), and 36% Nationwide! 

A recent study by GoBankingRates looked at the cost of renting vs. owing a home at the state level and concluded that in 36 states it is actually ‘a little’ or ‘a lot’ cheaper to own, represented by the two shades of blue in the map below.

One of the main reasons that owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that rates fell again last week to 3.43%.

Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.  

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters who would like to evaluate your ability to buy this year, meet with a local real estate professional who can help you find your dream home.

Posted by The KCM Crew

The Fed Announcement: What It Means for Mortgage Rates and the Housing Market

Interest rates remain at historically low levels, pushing the long anticipated rate hike into the future.

U.S. interest rates have seen nearly a decade of record lows, and 2015 was supposedly the year that they finally began to rise. The Federal Open Market Committee announced today that the benchmark interest rate for short-term lending will remain at its current target level of 0 percent to 0.25 percent.

Although rates didn’t climb today, an eventual increase will occur in the next couple of months.

“The federal funds rate, and in turn mortgage rates, remain low and will likely end the year roughly where they started it. For most markets and buyers around the country, the effects of any eventual interest rate hikes should be pretty small in the near term, but in some unaffordable markets where buyers are already stretching their finances, higher interest payments could more dramatically limit buyers’ options,” said Zillow Chief Economist Svenja Gudell.

Unaffordable markets include places like San Francisco and New York City, where housing is already very expensive. Buyers in these markets have little wiggle room when it comes to housing they can afford, and higher interest rates will limit their options even more.

On the flip side, higher rates will have little impact on markets such as Cleveland, where home values aren’t nearly as high.

To give you an idea of how a potential rate increase would impact home buyers, we took the current rate on Zillow Mortgages of 3.81 percent and did some calculations, using Zillow’s Mortgage Calculator, on homes valued at $150,000, $250,000 and $350,000. The goal was to see how monthly mortgage payments would be affected if the rate rose to 4 percent and 5 percent, assuming a 20-percent down payment.

Monthly Mortgage Payment

3.81% 4% 5%
$150,000 $767 $780 $851
$250,000 $1,234 $1,256 $1,375
$350,000 $1,701 $1,732 $1,898

As shown above, the higher the purchase price, the greater impact a rate increase will have on your monthly mortgage payment.

When this anticipated rate hike does occur, the majority of markets around the country will see little impact, which is great news for the housing market.

Posted by Jordyn Lee on Zillow