Inflation is a key indicator for where mortgage rates are headed. In simple terms, when prices of goods and services go up, investors of mortgage backed securities lose return. That is why when prices rise, so too do interest rates. The last report on inflation saw a slight drop; from 1.8% to 1.4% from January to May. With three jumps in interest rates this year, many projected a steady increase, but recently mortgage rates dropped slightly. While I’m not a prognosticator of interest rates, all signs from here to about December 2020 look like they will remain very low, perhaps even a slight decrease. That is good news for borrowers; especially the huge number of millennials that are taking advantage of low down payment mortgages and looser credit guidelines.
Inventory is getting better. After three consecutive months, pending home sales reversed course in June in all major regions of the United States with the exception of the Midwest. Almost all regions saw an increase in contract activity according to the National Association of Realtors®.
How about some more good news? As I’m writing this blog the Dow Jones Industrial average hit a record high, approaching the 31,000 mark; powered largely by Goldman Sachs, JP Morgan Chase and a few others.
As we navigate through the Covid19 cloud and assuming we overcome it very soon with vaccines, the economy certainly is starting to show signs of legitimate growth. Unemployment numbers SHOULD be next to improve with additional stimulus and if and when that happens, we should see a solid run of economic prosperity again.
If you have a steady job and are considering a real estate purchase or are considering getting a mortgage, now is a very good time to act! with mortgage rates still very low. You have to simply balance the prices of real estate and interest; but when you look at an amortization schedule you quickly place the value of low interest rates over slightly higher real estate prices. Please let me know if I can help you in any way or if you simply have any questions you need answers to.
2021 home sales came out of the blocks strong in January; growing at its fastest rate since 2017. According to the National Association of Realtors®, houses were on the market for an average of just 25 days. In January of 2012, the average turnaround time was 99 days.
Optimism inserts money, primarily investor money into the marketplace. When investors are optimistic and the stock market rises and shows stability, banks typically loosen their guidelines. Low interest rates, more forgiving mortgage guidelines, low and no down payment mortgage options and rent increases has put the housing market in gear, and it’s just starting to get heated.
Inventory remains the only issue as there is currently just a 3.3-month supply of inventory nationwide; which happens to be the lowest in history. That means if no new houses are listed, by May there would be no existing homes for sale in the market. I expect builders to be licking their chops and that’s a good thing for the housing market. When our country is building, it means people are confident in their futures. Business owners have positive expectations and employees are feeling comfortable with job security which is leading people to look at both new and existing homes. With rental prices increasing, millennials and other first time home buyers are taking advantage of low down and no down payment mortgages.
What about Sellers? Is it a good time to sell?
The simple law of supply and demand tells us that when there is more demand than supply, the value of sellers homes should rise right? Wrong with today’s sellers. Sellers today seem to think the market has reached its peak and prices will be declining. They are acting like we are in an economy on the decline; often taking the first reasonable offer and listing their homes for less than they should. This psychology perhaps is coming from the aftermath of the real estate meltdown as many people are satisfied with “getting out clean” or making very little on their real estate.
If you’re a buyer, you are in POLE POSITION right now; the market favors you. If you’re a seller, consider choosing a Real Estate Agent that properly educates you on real market trends and factual data; you may find that the sale of your home is more lucrative that you think!
The trade group’s January 2021 report shows 5.34 million homes sold on a seasonally-adjusted annualized basis, a three percent increase from the month prior.
Strength in housing has been attributed to low mortgage rates, rising rents, and a simpler approach toward mortgage approvals for many U.S. banks.
Demand for homes has been high — so much so that supply can’t keep up. There are now just approximately over 1.6 million homes for sale nationwide.