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Housing Prices are Expected to Rise 3.3% a Year Through 2017 as Mortgage Rates Remain Historically Low

Housing Prices are Expected to Rise 3.3% a Year Through 2017 as Mortgage Rates Remain Historically Low

In a recent housing report released housing prices are expected to increase on average of 3.3 percent a year through 2017 and mortgage rates will remain low historically speaking. Fiserv Case-Shiller Home Price Insights is forecasting home prices to increase 3.3 percent on average through 2017. Fiserv Case-Shiller Home Price Insights is also forecasting faster growth of 3.7 percent between Q3 2013 and Q3 2014.

Housing Prices are Expected to Rise 33 a Year Through 2017 as Mortgage Rates Remain Historically LowThe Fiserv Case-Shiller forecast is just one of many pointing to a healthy housing market for years to come. Home prices are projected to move higher annually, home sales are projected to increase and mortgage rates are also expected to move higher from current levels. 30 year mortgage rates today are averaging 3.58 percent and are expected to move above 4.00 percent sometime in 2014.

Conforming 30 year mortgage rates above 4.00 percent are still very low when you compare current rates to historical rates. Back in 2009 30 year rates averaged just over 5.00 percent according to Freddie Mac's 30 year fixed rate historic tables. Going even farther back, fixed 30 year conforming rates averaged 7.44 percent in 1999 and back in 1990 30 year rates averaged 10.13 percent.

The National Association of Realtors (NAR) forecasts home prices to go even higher than the Fiserv Case-Shiller forecast if home inventory supplies remain  low. Lawrence Yun, NAR chief economist, believes home prices will increase in the 5 percent to 6 percent range for 2013, and if the supply of homes for sale remains low in 2013 price gains could exceed 7 percent.

All this is very positive news if you own a home, especially if you bought at the top of the market in 2006 or 2007. If you're thinking about buying a home you're probably getting a little anxious since prices are moving higher. Home prices have moved higher the past 12 months and look to continue moving higher but home affordability is still near record highs.

The NAR's Housing Affordability Index, stood at 198.2 in November 2012 and is posed to set a record for all of 2012. Although prices are up, 2013 is projected to be the third best time on record when it comes to household purchasing power. The NAR's index is based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index number the more affordable homes are.

Home build sentiment is also moving higher as builders continue to break ground on building more homes. All this positive housing news is also good for the economy, the housing market is finally going to start contributing to GDP growth again after years to subtracting from GDP growth.

A stronger economy and especially lower unemployment will also help the housing market. There is so much pent up demand for home ownership once the unemployment rate falls well below current levels home prices should move up faster. In fact, unemployment rate fell to 7.7 percent in February, the lowest rate since December 2008. 236,000 jobs were created in February, stronger than the anticipated number of 160,00 jobs economists predicted. Another positive bit of news that will help housing.

Author: Robert Till
March 8th, 2013