What can home-buyers expect in the 2017 Spring Housing Market?
Rising mortgage rates might have an adverse demand on housing during spring home-buying season. The average 30 year fixed mortgage rate has risen from 3.47% to 4.13% over the past two months, according to the Freddie Mac Primary Mortgage Market Survey (PMMS).
The major reason for this increase in mortgage rates is rising inflation expectations due to expected forthcoming U.S. fiscal stimulus, along with a possibly quicker than expected pace of future Fed rate hikes.
An improving U.S. economy usually leads to stronger wage growth, so normally the higher income levels of prospective homebuyers should be able to afford this possible rise in their monthly mortgage payments. However, there still remains a shortage in the supply of homes for sale, especially in the big metropolitan areas of the United States. This lack of available housing has led to a steady increase in housing prices over the past few years, which coupled with the now appreciating mortgage rates, might make housing less affordable. This shortage of listings for sale is especially prevalent for starter homes. This lack of a lower-end housing inventory could get more magnified if less people decide to trade up and buy a bigger home in fears or losing out on their current low mortgage payments.
However, even with the recent spike, mortgage rates do remain close to historical lows. In addition, a greater availability of low-down payment mortgages makes being able to purchase a home easier, especially since a consumers biggest holdup in being able to buy a home is usually a lack of a down payment, since a prospective homebuyers rent payment might even be comparable to a mortgage payment in this low rate environment.
Overall, the spring buying season might also bring a slowdown in the pace of housing price appreciation, due to these higher mortgage rates. However, the demand for housing should remain robust, especially with the improving U.S. economy and labor market.
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. Then, when it comes time to make your offer, the preapproval letter will make your bid more competitive. This is especially true for first-time home buyers as the spring will most likely see a shortage of available entry-level homes.
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