NOVEMBER 17, 2016 WRITTEN BY
I have titled this piece ‘Uncertainty’ to reflect the current state of the housing market. With the election behind us, there have been simultaneous divergences in the financial arena. The stock market has roared to new highs presumably on the outcome of the election. Conversely, the bond market has experienced a dramatic decline in prices which results in higher yields. It is this shift that has piqued my interest.
Mortgage rates are affected by a number of variables, but the most prominent is the 10 year U.S. Treasury Bond. Since the election, the yield on the 10 year has spiked to almost 2.25% from 1.75% on election day. This represents a 50-basis point jump in a matter of weeks. That jump has resulted in a rate increase for 30 year mortgages. Mortgage rates had been hovering at the 3.5% level for quite some time, but now rates have started to trend upward to 4%. I have read that this could also be in anticipation of the Federal Reserve’s indication that they are exploring raising short term interest rates. Whatever the cause, it bears taking a hard look at what the results may be.
If you are considering buying a new home, you are most likely thinking, “Should I sit and wait or do I make the move to buy now?” The 4% level, in relative terms, is not high when you compare it to most recent years. In 2014, the 30-year rate was around 4.5%, and in 2006, the average was 6.75%. As my husband reminded me while I composed this, our first home back in 1981 carried a mortgage of 15%!! If one’s perception is that rates will continue to rise, then it would be prudent to start the approval process sooner rather than later. Getting preapproval and having one’s finances in order are the basis for starting your search.
While mortgage rates are a major factor in a purchase decision, finding the right property in the right locale at a comfortable price is key, which I why I cannot stress enough the importance of having a knowledgeable agent to guide you. Putting together a wish list with your basic search criteria will help your agent find the perfect home and eliminate some of the uncertainty that goes along with decision making. While I cannot make a prognosis on the direction of mortgage rates, I can say the market is still healthy, as evidenced by my company’s continued strong performance. Uncertainty sometimes breeds opportunity, and I am certain this is an opportune time to find the home you’ve been waiting for…