With mortgage rates at an all-time low and consumers feeling more positive than ever with the prospect of putting up their own white picket fence, experts say now is still a good time to buy a home. However, with a rebounding economy and price appreciation in major local real estate markets, homebuyers interested in getting a bargain had better move fast.
Mortgage rates currently at 2.69% for a 15 year fixed, down from 3.26% a year ago, according to Freddie Mac’s Primary Mortgage Market Survey. Although home prices may increase, interest rates are expected to remain low for the next year, according to Jennifer DuBois, Realtor.com Director of Communications.
“With the central bank saying in its Sept. 13 statement, ‘exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015,’ we anticipate interest rates remaining low for the next year,” says DuBois.
Joe Gross, CEO and founder of National Mortgage Expert, says that with such low rates, home ownership may now be a viable option for individuals or couples who could previously only afford to rent.
“Rates are at the lowest they have been, which means the payment is more affordable, and in many cases even cheaper than renting an apartment,” says Gross, adding that with many home prices “hitting bottom,” consumers would be smart to get involved.
However, getting involved with the purchase of a first home may be slightly more difficult than it was a year ago, according to DuBois.
“Inventories of houses for sale are much lower than they were a year ago,” she says. “Key market indicators suggest that large parts of the housing market have bottomed out and entered a recovery mode.”
According to Realtor.com data, the median list price on homes in September 2012 was almost 1% higher than it was one year ago. Although this may mean better news for home buyers than home sellers, it’s a sign that the housing market overall is improving.
“Lower inventories, combined with somewhat higher median list prices, suggest that the housing market ending the 2012 home-buying season is in better shape than it was a year ago,” says DuBois.
Homes that are moving the fastest tend to be in the “starter home” category — typically homes that are older and smaller.
“We are seeing homes in the lower third tier of the market move quickly as first time homebuyers and investors competitive for the same properties,” says DuBois.
Fannie Mae's September 2012 National Housing Survey shows consumer optimism regarding the housing market as well as the overall economic situation is up — 41% of consumers now believe the economy is on the ”right track,” up from 33 percent last month. Almost 70% of people now say that if they had to move, they would choose to purchase a home rather than rent.
According to the survey, consumers expect home prices to increase by 1.5% in the next year, however only 33% say they expect mortgage rates to increase. Unfortunately, there’s no real way to tell where things are headed, according to Bob Walters, Quicken Loans Chief Economist.
“This is where a crystal ball would come in handy,” says Walters. “What we do know is that the Fed is committed to keeping interest rates reasonably low for an extended period. If the economy starts to heat up, or inflation begins to raise its ugly head, we could see rapid and painful increases in long-term mortgage rates.”
However, even though there’s still a lot of uncertainty out there, Walters stresses that with unemployment numbers improving and fewer foreclosures entering the market, there is renewed confidence in the housing market.
“Good news begets good news. In many markets we are seeing the homes in good shape selling faster than any time in recent memory,” Walters says. “Multiple offers on homes have become more frequent. Overall, we are seeing glimmers of hope.”