Interest Rates Remain Low, But for How Long?
Despite some volatility in mid- to late-March, low rates continue their smooth stride into the spring home buying season. Rates jumped slightly this week to 3.99% after the yield on the 10-year Treasury note hit its highest level in two months. The increase in rates spurred a 8% drop-off in refinances, but purchases are still up.
Home loan applications for purchases moved higher in early April due to consistently low rates and were 8% higher than the same time one year ago. Applications to refinance, which are more dependent on interest rates, rose 4% in April and were a surprising 44% higher than the same time one year ago.
Applications for the two main types of home loans, conventional (typically 15 and 30 year fixed rate loans) and government (Federal Housing Administration and Veterans Administration loans), also moved higher. This indicates both move-up and first-time buyers are back or getting into the market. Government-insured loans tend to attract first-time buyers due to their low down payment requirements. Volume for these loans grew by an impressive 19 percent from a year ago.
Fewer Homes on the Market
Higher prices and tight supply continue to stifle the market. In Mt. Pleasant the average listing price for a single family home so far in May is $557,000, up from $526,000 in May of 2014. “Pending sales showed solid gains last month, driven by a steadily-improving labor market,” said Lawrence Yun, the National Association of REALTORS® chief economist. “However, the underlying obstacle—especially for first-time buyers—continues to be the depressed level of homes available for sale.” Last year at this time there were 537 homes for sale and currently there are 483, a 10% decrease in inventory,
In a Bloomberg interview, Mortgage Bankers Association CEO David Stevens stated that home prices are rising twice as fast as wages and he expressed concern that inventory will drive up prices, discouraging many would-be homebuyers. Total housing inventory at the end of March was slightly lower than one year ago, and new listings are not coming on at nearly the pace needed to meet demand, according to an April CNBC housing report.
The Bottom Line
Low rates make it an exciting season to become a new homeowner, or to refinance your existing home loan. But keep in mind, if you are thinking of buying a strong employment report in the next week, may cause rates to continue on their slow, steady rise.
If you or your friends, family or colleagues have questions, please contact The Avera Group today.