Mortgage rates have been going higher this summer. Some Real Estate Experts fear that the “booming” market we’ve seen, could be in for a bumpy ride as mortgage rates climb, because First Time Home Buyers need the lower mortgage rates to qualify.
Home buyers and sellers heading into the busy summer season have been watching mortgage rates wondering how long the good times can last.
The national housing market has been gaining strength in recent years as prices rose rapidly in many areas. In the first quarter, 51 metro areas posted double-digit percentage price gains, according to the National Association of Realtors.
Home sales in the Raleigh, NC real estate market remain strong too. Average price of a closed home in April was $262,000.00 up 5% from last year. Average days on the market were 57 which is 14 days shorter than last year.
The real interesting figures, though, are these: number of homes on the market in the Raleigh Market was 17% lower and the number of new homes fell 10%. This is forcing up home prices.
Which means, first time home buyers, in particular, are looking at slightly higher mortgage payments, simply because the cost of the NC house is now higher.
But economists say that momentum may not outlast higher mortgage rates, depending a lot on location.
For five years, mortgage rates have hovered around 50-year lows, a situation most economists believe will start to reverse if the Federal Reserve begins to raise interest rates later this fall.
Rates on 30-year conventional mortgages averaged 4.08% for the week ended Thursday, according to mortgage giant Freddie Mac. Until a few weeks ago, mortgage rates (according to the same survey by Freddie Mac) had been below 4% for months.
Greece did technically default on its debts on Tuesday.
NORMALLY this would be seen as BAD NEWS for the World Economy. BAD NEWS in the Economy usually means Lower Interest rates… but not this time!
“After a minor rally in Treasury bonds that mostly faded as the week went along (and never took much hold in mortgages) interest rates ended a little bit higher.
With a long U.S. weekend on tap for Independence Day, and with a debt-vote referendum by Greek citizens coming up on Sunday, it’s unsurprising that rates are a little higher, as higher rates are indicative of a more defensive posture by investors against unknowable outcomes.
It’s hard to know what to expect as far as the outcome for the Greek mess is concerned. At least at the moment, and unlike six months ago, the economic fortunes of important economies is improved, and that seems to be trumping any concerns at the moment.
Given the present stance of the market, it would be hard to expect lower mortgage rates next week. However, Greek banks are (at the moment) slated to reopen, and the debt referendum is Sunday. We could be in for some additional volatility for mortgage rates as these things unfold.”
Mortgage rates typically track direction based upon the 10-year Treasury notes… and most recently the price of gas and the Economic “sentiment” from Greece and Europe.
Mortgage rates matter, when you are looking at the strength of the housing market, because higher mortgage rates boost mortgage payments.
For instance, at 3.9% APR, monthly payments on a 30-year, $400,000 mortgage would be about $1,890. If rates rose one point to 4.9% APR, payments would rise to $2,100 a month; at 5.9% APR, payments would be about $2,370 a month.
While modest increases in interest rates are certain to knock some first time home buyers out of the market, many economists believe most home buyers will hang in—at least for the near term.
The reason: The monthly cost of an average-size home remains relatively affordable when compared with average incomes.
Apartment rents also have risen sharply in recent years.
High rents make it less likely potential home buyers will be scared off from purchasing their first home. Even at slightly higher mortgage rates, families in most North Carolina cities will be better off buying instead of renting.
At mortgage rates of 5% APR, typical home buyers would need to spend 17% of their income to afford the median-priced home, while right now they need to spend much more than that to rent a typical apartment in Urban NC, according to Trulia.
More recently, mortgage rates surged in June 2013 as investors anticipated that the Federal Reserve would pull back from its bond-buying program.
That “taper tantrum” sent rates from around 3.6% in May 2013 to around 4.5% that July. The pace of sales of previously owned homes declined 8% from July to December 2013, according to the National Association of Realtors.
This time, economists said the North Carolina economy overall is in better shape to handle increases in Mortgage Rates and Home Prices.
If you are looking for today’s best mortgage rate on a New Home in North Carolina – Call Steve and Eleanor Thorne 919-649-5058 we love working with First Time Home Buyers.