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A recent decline in mortgage rates should help spur demand for housing during the spring home-buying season. The average 30-year fixed mortgage rate has fallen from 4.51% to 4.31% since the beginning of the year, according to the Freddie Mac Primary Mortgage Market Survey (PMMS).
The major reason for this decline in mortgage rates is due to a projected slowdown in Fed rate hikes stemming from a stabilization of inflation expectations, along with increasing market uncertainty due to the ongoing U.S. and China trade negotiations and the upcoming Brexit vote.
The U.S. Economy and Labor market are continuing to expand, with U.S. wage growth at an almost at nine-year high. Rising consumer income levels, along with lower mortgage rates, should further help increase housing affordability.
A consumer’s biggest holdup in being able to buy a home is usually the lack of down payment, since monthly mortgage payments tend to be similar to rent payments. Because of this, there is a growing availability of low, down payment mortgages (such as a 3% down payment program) to make the purchase of a home more affordable
Another issue remains a shortage in the supply of homes for sale, especially in the big metropolitan areas of the United States. However, there have been signs of further new home construction and rising inventory, especially in the condo market. Also, this decline in mortgage rates could encourage some families to trade up to buy a bigger house, thus offering additional entry level supply for starter homes.
Overall, the spring buying season should show robust demand for housing, due to declining mortgage rates, rising wages, and a projected increase in available homes for sale.
In conclusion, as you drive around your neighborhood, you will probably notice many open houses happening already. So, if you are looking to buy a house in the coming months, make sure that you are preapproved with a mortgage lender. This will let you know how much of a home you can afford in terms of a monthly payment and down payment. Then, when it comes time to make your offer, the preapproval letter will make your bid more competitive, since you can probably be sure that other prospective buyers will have one too.