Skip to main content

Everybody Calm Down (Posted January 16, 2017)

At the end of last year, the Federal Reserve did something ghastly!  They raised rates by a whole .25%.  Egad!  (I believe that’s an Olde English word meaning, “what the heck!”)  Before we get our English riding pants in a twist, let me put something in perspective: this rate increase is only the second one in A DECADE.  I know some of you are saying, “Sure, but they’ve already indicated that they are going to raise the rates THREE TIMES in 2017!”

That indication from the Fed explains the recent National Housing Survey from Fannie Mae which reveals that 60% of consumers believe mortgage rates will head north (no, they’re not talking about the rates upping sticks and moving to Canada) in the next 12 months.  Although unlikely, mortgage rates COULD spike to 5% in response to the Fed’s three increases – that’s about where it was in 2010. 

Since 1971, the benchmark rate has averaged at 8.25% - that’s a good 3.25% HIGHER than the worst-case scenario for 2017 that some are projecting.  Want something else to give you a warm fuzzy about our present and near-future circumstances?  In 1981, 16.63% was the average rate for a 30-year fixed-rate mortgage.  Last I checked, lots of people bought lots of houses back in the ’80s. 

Want another shot of the warm fuzzies?  The number of mortgage applicants getting approved has reached record highs – that’s a DEFINITE sign of a continued loosening of credit and lending requirements. What’s more is that this will be a good year for folks seeking to finance more expensive homes with Fannie and Freddie (they sound like an old married couple where one of them gives the neighbor kids candy while the other tells them to get off their lawn) raising the limits on the loans they’ll purchase from $417,000 to $424,100.  An older couple like Fan and Fred doesn’t increase that lending limit by even a dollar without A LOT of confidence in the market – they wouldn’t be able to keep buying candy for the neighbor kids and maintain such a lovely green lawn if they weren’t careful with their money.

I can’t see into the future – and it has nothing to do with the tinfoil hat I wear on occasion to keep the government satellites from reading my thoughts – but I think it’s safe to say 2017 will most likely see a slight increase in the mortgage rate.  While I don’t believe it’s a possible rate increase that will present you with a challenge, I do believe that the increasing values of homes will – their value is outpacing the growth in most people’s wages.  Buying now (or in the very near future) will get a better price and allow you to build equity much more quickly.  And if you end up buying the house next to Fan and Fred, let me know what he uses on his lawn to get it looking that green.

Comments

Post a Comment

Popular posts from this blog

Posted August 31, 2015

Fast . . . So They’re Not Furious InSellerate , a lead-generation company, conducted a study that yielded some very interesting insights: •    32% of consumers expect a company to respond to an online inquiry within 30 minutes •    42% of consumers expect contact within one hour •    M ore than half of the companies studied (56.34%) did not respond to the online or email inquiry at all Of those companies that did respond, the average response time exceeded 24 hours, and the primary response vehicle was email, which is a passive, relatively non-effective method of contact .   The take-away thought from all of this is “no kidding”, of course, but it underscores the wisdom that a lead is only as good as the work you put into it. Safety Over Sales According to a USA Today article, realtors in Iowa are taking steps to ensure the safety of all agents. The initiative includes an optional seller contract that prohibits any agent from ...
Post a Comment
Read more

Rates are Overrated

Buckle up and get ready to have your mind blown!   Okay, it’s not THAT mind blowing – some of you might even say, “well, duh” – but it’s still interesting. The economists (that’s a fancy term for “the smart folks”) at the New York Federal Reserve published the results of a study, which reveal that changes in down payment requirements have MORE influence over home buyers’ willingness to buy than changes in rates.   Follow me on this – you’ll be glad you did! Surveying both buyers and renters, those smarty pants at the Fed found that the effect of interest rates may be overrated when compared to changes in down payment requirements.   The study found: • Dropping the down payment from 20% to 5% INCREASES the willingness to purchase, on average, by 15% among buyers and 40% among renters • Decreasing the interest rate on a 30-year fixed-rate loan only raised the willingness to purchase by 5%, on average If you’re straddling the fence between BUY RIG...
Post a Comment
Read more

Perspective Produces Progress

Each week I try to write something that will either make you think about a rather humdrum mortgage/real estate topic in a new way or at least clear the cerebral cobwebs.   Admittedly, some weeks I’m better at accomplishing that than others – my apologies for those “off” weeks.   As I’ve been trying to come up with a topic for this week’s missive, it’s not so much that I’ve been hitting a brick wall that’s been keeping me from inspiration, it’s that I’ve felt sort of “dragged down” by so many things that have been happening here in our own backyard over the past few weeks that have been . . . less than inspiring.   It seems that wherever you turn – TV, radio, Facebook, Instagram , newspapers (they still exist) – one party isn’t happy unless the opposing party is proven wrong and/or devastated.   I’m not advocating the philosophy that “everyone’s a winner and should get a trophy just for showing up” – I’m an advocate of just the opposite when it comes to c...
Post a Comment
Read more