Home Buyers Feel Sense of Urgency as Low Mortgage Rates and Prices Drive Demand
Home buyers are feeling a sense of urgency to buy as low mortgage rates and home prices are driving home purchases. Buyers wonder if they should jump on a property now or risk higher mortgage rates and increased home prices tomorrow. While mortgage rates are expected to move higher in 2013, the increase won't be dramatic.
30 year conforming mortgage rates today are averaging 3.77 percent and are expected to move higher in 2013 but remain near the 4.00 percent range. Home prices are also expected to move higher in 2013 but the increase will depend on where you're buying. The National Association of Realtors reported that home prices have increased 12 percent in January 2013 over January 2012, and expects prices to continue to increase in 2013. Corelogic forecasts home prices to increase another 6 percent in 2013.
Average mortgage rates have moved higher in 2013 but are only slightly above all-time record lows set in November 2012. The all-time record low 30 year rate was 3.27 percent in November of 2012 according to Freddie Mac. In last week's mortgage rate survey released by Freddie Mac, 30 year rates averaged 3.54 percent.
Higher mortgage rates are slowing the demand for refinance loans but higher rates are not expected to keep home buyers from coming back into the market. In fact, just the opposite is happening as buyers who have waited several years for home prices to bottom out are finally more comfortable shopping for homes again, knowing prices are on their way back up. A low available inventory of homes for sale is also forcing home prices higher.
The NAR reported there are 1.94 million existing homes available for sale in February, which represents a 4.7 month supply at the current sales pace. While the number of homes available for sale is up from 4.3 months in January, it's down 19.2 percent from a year ago when there was a 6.4-month supply. January's number also represented the lowest number of existing homes for sale since May 2005.
Buyers will continue to make their way back into the market as a stronger economy and a higher rate of employment will help demand and consumer confidence. "Knowing the economy is doing better and that more jobs are available, buyers will feel more comfortable buying a home," according to Brian McKay of MonitorBankRates.com.
Housing analysts don't expect home price appreciation to return to the annual double digit increases of the housing bubble. Long term price increases are expected to return to the historical norm in the 2 percent to 3 percent range. The only easily foreseeable factors that could derail the recovery in home prices are either another recession or high inflation, which could send mortgage rates considerably higher. Neither is expected to happen in the coming years.
RatesORama.com Average Mortgage Rates