What’s going on with Falling Interest Rates??

    Is now the best time to act on Falling Interest Rates???

The headlines agree mortgage interest rates have dropped substantially below initial projections.

Are you one of the many who are considering purchasing a home or moving up to their dream home??

Let’s take a minute and review what’s happening in our market right now and draw some conclusions about market timing in 2015…

A recent article on the Economists’ Outlook blog by the National Association of REALTORS® (NAR) provides insight into one major factor in the decline in interest rates, the price of crude oil.

“As of January 5, 2015, the U.S. Energy Information Administration (EIA) reported that the price of regular gasoline was $2.20/gallon, the lowest since gas prices peaked to about $ 4/gallon in May 2011.”

You may have noticed that filling your gas tank has become substantially less expensive in recent months. The average in Westfield is $2.05, not long ago we were looking at more than double that price!  The average US household is projected to save around $550 in 2015.

So what’s the connection to Interest Rates?

“Lower oil prices mean lower inflation rate, which pushes down mortgage rates.”

Based on Freddie Mac’s weekly mortgage survey as of January 22, 2015, the 30-year fixed rate averaged 3.63% and the 15-year fixed rate averaged 2.93%.

Primary Mortgage Market Survey

“The decline in oil prices is generally positive to households by way of the gas savings and lower mortgage payments. That savings will boost consumer spending in other areas.”

How long will rates stay low?

No one really knows how long oil prices will continue to support low mortgage rates. In a New York Times article, the author points to the fact that “adding hundreds of billions of dollars to consumer spending” could start to have a “counter effect” on rates as the economy continues to strengthen.

So what’s the conclusion:

Don’t wait too long

The low interest rates we are currently experiencing are not going to stay around forever. The current projections from Freddie Mac, Fannie Mae, NAR and the Mortgage Bankers Association all agree that interest rates will increase to between 4.3-5.4% by the end of 2015.

Interest Rates 2015 | Keeping Current Matters

The NAR reports: “At the median home price of $205,300, a 0.75 percentage point drop in mortgage rates will yield savings of about $1,000 annually.”

If you are in a position to buy a home make sure that you meet with a local real estate professional with their finger on the pulse of what’s going on in the market. Don’t let a delay in purchasing impact your family’s financial future.

To learn more about your local market or discuss this article please feel free to contact me!

Tori Denton, REALTOR®

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Here are 3 great questions to ask before buying a HOME

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.

There are three questions you should ask before purchasing in today’s market:

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

Here is what the experts projected in the latest survey:

  • Home values will appreciate by 4% in 2015.
  • The cumulative appreciation will be 23.5% by 2019.
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 15.1% by 2019.

Special Report

Members of an expert panel share their opinions re: the impact of institutional buyers on the housing market, and how much longer The Fed’s monetary stimulus program should remain in place. Note: 48% of these experts feel conditions of the recovery have already happened or will happen within 1-2 years!

Home values are appreciating by leaps and bounds according to the Zillow research team:

Line chart

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of RealtorsFannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.

Last week, the MBA index of refinance mortgage applications volume increased 66% in response to
interest rates falling below 4 percent for the first time since the middle of 2013. Conventional refinance volume increased to a greater extent than government refinance volume.

Compared to when interest rates last fell below 4 percent, last week’s index level is about one-half of the average level during 2012 and 2013 when rates were this low.

Bottom Line

Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.

Ten Steps to Prepare for Home Ownership

Ready to put your rental days behind you and march right into home ownership in 2015??

It’s a great time to start preparing for that process. Even if you won’t be ready to buy for a few months, the following steps with get your started on the right foot!

1. Check your credit

Go to Annual Credit Report and request free credit reports from all three credit reporting bureaus: TransUnion, Equifax and Experian. For a small fee, you can also get your credit score.

First – check the reports thoroughly for any errors that need correcting and any negative information.

These reports should also indicate what you can do to improve your credit. A higher credit score makes it easier to qualify for the lowest interest rates, which in turn make your purchase more affordable.

2. Start saving

One trick is to save the difference between your rent and what you estimate your mortgage payment will be—or more. You’ll need cash reserves to buy a home, and you’ll need to prove to a lender that you can afford housing payments that may be higher than what you’re currently paying in rent.

3. Earn extra cash

If you’re low on cash, as most first-time buyers are, consider taking drastic steps to cut spending. Or try out some ways to increase your income, such as selling some of your stuff or taking a part-time job.

4. Start looking at neighborhoods

Unless you already know where you want to live, take the time to visit a variety of potential towns and neighborhoods. You’ll want to scout out neighborhoods that meet your needs in terms of transportation options and other amenities. Exploring different locations will help you narrow your priorities.

5. Consult a lender

The sooner you visit a lender, the quicker you’ll know what you can afford and the steps you need to take to improve your credit or generate more income. They will have valuable information on current government programs, rates, and financial assistance opportunities.

6. Investigate down payment assistance programs

Visit Down Payment Resource to learn about programs in your area that may help you find down payment money or a low-interest loan.

7. Attend a seminar or take classes on buying a home

Lenders and agents often offer free seminars that explain the home-buying process. Many local government and nonprofit agencies also offer classes that can help you prepare for the financial responsibility of owning a home.

8. Decide how much you want to spend

A lender can give you an idea of how much you can borrow, but you have to create a personal budget to decide how much you will be comfortable spending on your mortgage payment.

9. Contact your REALTOR®

Your Realtor® can set you up with daily emails on properties that are available in your price range, area, and with your preferences.

10. Drive by homes you find appealing.

Some homes may lose their appeal from the curb while others make you want to view them immediately. Your Realtor can arrange showings and set you out on the path to home ownership!

Consider following these 10 steps and you will be well on your way to Home Ownership in 2015!

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