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Home Buying Power Remains In Motion Depsite Rising Mortgage Rates

November 30, 2018 by support

Home Buying Power Remains In Motion Depsite Rising Mortgage RatesThe real estate market does not occupy a space outside the laws of physics. As Sir Isaac Newton so aptly theorized, “For every action, there is an equal and opposite reaction.” When applying the English physicist’s Third Law to today’s rising mortgage rates, anticipating the reaction can be valuable information if you are planning to buy or sell a home or commercial property.

At first blush, residential home buyers and commercial property investors might expect the “opposite” reaction to impact buying power negatively. The initial data might lead many to believe that premise.

How Home Buyers Reacted To Rate Hikes

According to Realtor.com, the average cost to American mortgage holders increased by 15.8 percent from Sept. 2017 to Sept. 2018. In dollars, that totaled about $223, reportedly from $1,413 to $1,636 when considered against the median home at $294,900. That so-called reaction seems to indicate a loss of buying power for everyday homeowners.

Naturally, these increases were higher in top real estate markets with New York at $545 increase and Seattle at $533 where the median home costs $529,900 and $550,045 respectively. The top 20 housing markets incurred a total 68 percent of the increases year-over-year. Compounding the reaction to rising rates, many pundits are claiming the Fed’s rate hikes are creating stock market volatility.

All of these numbers seem to indicate a gloomy opposite reaction to mortgage rate increases. Or do they?

Real Estate Market Remains In Motion

Much of that thinking stems from looking at increased costs as if they somehow prohibit home buyers from making purchases. But the very fact that Americans are purchasing homes and paying somewhat higher monthly mortgage premiums indicates people enjoy the required buying power. Yes, rates have increased since the Great Recession, but that was always the plan.  

Keep in mind that Newton has a few other applicable laws of physics as well. For example, “A body in motion remains in motion.” The Fed’s decision to finally raise rates was held back by a sluggish recovery. Today’s robust economy has prompted the long overdue interest rate hikes, but they are still quite low.

If, for example, mortgage rate increases resulted in a stagnant housing or commercial real estate market, that might be considered an adverse reaction. However, single-family homes and investment properties are in high demand.

That should indicate that the booming economy has improved buying power ahead of mortgage rate increases. Simply put, Americans seem to be ahead in the real estate game.

For everyday families interested in starter homes, homeowners eyeing a more substantial property or commercial investors looking to get into the market, a smart equal and opposite reaction to rate increases may be to get in quickly and enjoy today’s low rates before the next planned increase.

Be sure to consult with your trusted mortgage professional for your best financing options.

Filed Under: Mortgage Tagged With: Home Sales, Interest Rates, Mortgage

What’s Ahead For Mortgage Rates This Week – November 26th, 2018

November 26, 2018 by support

What’s Ahead For Mortgage Rates This Week – November 26th, 2018Last week’s economic readings included readings from the National Association of Home Builders Housing Market Index, National Association of Realtors® report on sales of pre-owned homes and Commerce Department readings on housing starts and building permits issued. Weekly reports on mortgage rates and first-time jobless claims were also released.

Housing Market Challenges Catch Up to Builder Sentiment

According to the National Association of Home Builders, overall builder sentiment fell six points to November’s reading of 60. This was the largest decline in builder sentiment since 2016. Ongoing concerns over lot and labor shortages and rising costs of building materials were cited along with recently rising mortgage rates.

Demand for homes eased as potential buyers were sidelined by rising rates, shortages of homes for sale and approaching winter weather and holidays. Any Housing Market Index reading over 50 is considered positive, but steep drops in builder sentiment is considered a predictor of stabilizing market conditions.

National Association of Realtors®: Sales of Pre-Owned Home Sales Rise in October

Sales of previously-owned homes rose in October to a seasonally-adjusted annual rate of 5.22 million sales as compared to September’s reading of 5.15 million sales. Analysts estimated a reading of 5.18 million sales. While this reading suggests that buyers are active, an increase in home sales signals easing demand as compared to recent months when many buyers were sidelined due to extreme buyer competition for short inventories of homes for sale.

Mortgage Rates First-Time Jobless Claims Fall as New Jobless Claims Rise

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed rate mortgages averaged 4.81 percent, which was 13 basis points lower than the previous week. Rates for 15-year fixed rate mortgages averaged 4.24 percent and were 12 basis points lower.

Rates for 5/1 adjustable rate mortgages averaged 4.09 percent and were five basis points lower. Discount points averaged 0.40 percent for 30-year fixed rate mortgages, 0.50 percent for 15-year fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims rose last week to 224,000 new claims filed as compared to expectations of 215,000 claims. The prior week’s reading was 221,000 new claims filed.

What‘s Ahead

Economic readings set for release this week include Case-Shiller home price indices, new home sales and pending home sales. Weekly readings on mortgage rates and new jobless claims will also be released.

Filed Under: Financial Reports Tagged With: Financial Reports, Interest Rates, Mortgage Rates

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This licensee is performing acts for which a real estate license is required. C2 Financial Corporation is licensed by the California Bureau of Real Estate, Broker #01821025; NMLS #135622. Loan approval is not guaranteed and is subject to lender review of information.

Loan is only approved when lender has issued approval in writing. Specified rates may not be available for all borrowers. Rate subject to change with market conditions. C2 Financial Corporation is an Equal Opportunity Mortgage Broker/Lender.

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The services referred to herein are not available to persons located outside the state of California.
C2 Financial Corporation is approved to originate VA and FHA loans, and has the ability to broker such loans to VA and FHA approved lenders. C2 Financial Corporation is not acting on behalf of or at the direction of HUD/FHA or the VA.

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