Tag Archives: interest rates

Home Prices on a 31-Month Hot Streak

Source: RISMedia

Home prices are on a hot streak, reaching a 31-month high in January in the recently released S&P CoreLogic Case-Shiller Indices.

Prices fired up 5.9 percent year-over-year in the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, an increase from 5.7 percent the month prior. The Index’s 10-City Composite rose 5.1 percent, while its 20-City Composite rose 5.7 percent. The 10-City Composite eked out a 0.3 percent increase month-over-month; the 20-City Composite, 0.2 percent month-over-month.

Denver, Colo., Portland, Ore., and Seattle, Wash., once again led the tear, with Seattle showing the most gains at 11.3 percent year-over-year.

The trend could be disrupted if the Federal Reserve decides to raise the key interest rate three or four more times this year, which would result in a significant impact to mortgage rates, says S&P Dow Jones Indices Chairman and Managing Director David M. Blitzer. The Fed raised the rate in December 2015, December 2016, and, most recently, in March.

“Housing and home prices continue on a generally positive upward trend,” Blitzer said in a statement. “The recent action by the Federal Reserve raising the target for the Fed funds rate by a quarter percentage point is expected to add less than a quarter percentage point to mortgage rates in the near future,. Given the market’s current strength and the economy, the small increase in interest rates isn’t expected to dampen home-buying. If we see three or four additional increases this year, rising mortgage rates could become [a] concern.”

The story continues to center on inventory, which, according to Trulia, hit a new low at the beginning of the year, with starter home supply especially tight.

“Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes,” said Blitzer. “The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline; however, we don’t appear to be there yet.”

What will end the upward spell? According to Bill Banfield, vice president at Quicken Loans, more new home construction is needed to release the pressure.

“Home prices continue to reach new heights, propelled by the lack of available housing,” said Banfield in a statement. “This is the narrative we have heard many times, and it is likely to continue until construction increases and provides more options both move-up and first-time buyers.”

Source: S&P Dow Jones Indices

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Are Higher Mortgage Rates Scaring Off First-Time Homebuyers?

Source: RISMedia

First-time homebuyers are shying away from their plans to purchase this spring, according to a recently released report by realtor.com®, due to the surge in mortgage rates in the last two months of 2016. Though rates have deflated since the end of the year, they remain hovering above 4 percent—high enough to scare off first-timers this spring, now down to 44 percent from 55 percent in October.

“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” says Jonathan Smoke, chief economist for realtor.com. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move-up in rates is discouraging new homebuyers already.”

First-time homebuyers affording a 20 percent down payment on a median-priced home at the current average 30-year rate would be responsible for an additional $720 in interest each year, according to realtor.com’s report.

Record-high home prices will tamp down first-time homebuyers, as well. The median list price in December 2016 matched the median list price in July 2016: $250,000. Inventory in December 2016, in addition, remained limited, setting the new year up with the lowest inventory since the recession. The National Association of Home Builders (NAHB) expects single-family construction to grow 10 percent in 2017.

The rise in rates is not stifling demand overall, though, according to realtor.com’s report—in fact, repeat homebuyer activity has continued, as buyers, uncertain about the future, take advantage of still-low rates. Consumers recently surveyed by Fannie Mae believe now is a good time to buy a home, but also believe mortgage rates will rise in the year ahead.

“Last fall, we saw a large jump in the number of first-timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” Smoke says. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing, and affordability is one of their largest barriers to homeownership. This number could continue to decline with anticipated increases in interest rates and home prices.”

For more information, please visit www.realtor.com.

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Market Feels Effects of Rising Rates, Pending Home Sales Pull Back

SOURCE: RISMedia

The housing market is feeling the effects of rising mortgage rates, with pending home sales pulling back to year-lows last month as homebuyers struggled to put purchases in play, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 2.5 percent to 107.3 in November, down from 110.0 in October.

“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” says Lawrence Yun, NAR chief economist. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

All is not lost, however. Rising mortgage rates, according to Yun, will be balanced by a more robust growth in wages in the next year.

“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” says Yun. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”

The Northeast saw the most pending home sales activity in November, with the PHSI up 0.6 percent to 97.5—now 5.7 percent above one year ago. In the Midwest, the Index was down 2.5 percent to 103.5, 2.4 percent below one year ago. Pending home sales in the South were down 1.2 percent to 118.7, 1.3 percent below one year ago. The Index in the West was down 6.7 percent to 101.0, 1.0 percent below one year ago.

Existing-home sales are still expected to close out 2016 at 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), according to NAR. The national median existing-home price is also still expected to end 2016 at a 5 percent growth rate.

Looking ahead, existing-home sales are expected to come in at 5.52 million in 2017, while the national median existing-home price is expected to grow 4 percent.

For more information, please visit www.nar.realtor.

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