Why wait until the last minute? Several members of the Federal Reserve Board of Governors sounded more amenable to higher interest rates late last week so the markets apparently decided to get ahead of the game. While the next decision point on a Fed Funds rate hike won’t be until next week, mortgage and bond rates rose sharply last Friday, then took a couple of what one analyst called “pause days.” Still, mortgage rates moved back to June levels with the 30-year fixed rate at 3.50%.
To keep things in perspective, however, the current rate is only 8 basis points (bps) higher than Freddie Mac’s lowest post-Brexit rate and is 51 bps lower than at the beginning of the year. Buying and refi-ing continue to look awfully good.
CoreLogic reports that more than a half-million homeowners regained positive equity in the second quarter, leaving 3.6 million still underwater. Homeowners nationally gained $646 billion in equity compared to a year earlier, largely due to rising home values.
In a now near-normal market, over two-thirds of home sales are to individuals buying with mortgages, where five years ago close to half were to investors and/or cash buyers. Chris Bowden, Freddie Mac senior vice president, says this means increased opportunities are there for first-time homebuyers “provided they have the patience and know-how” to make a good offer. He has some tips for doing so.
First, understand how much you can afford–not only your price limit for a house, but how much your budget can afford in monthly expenses for repairs, upkeep, and utilities. Your trusted mortgage professional will help you with this step.
Second, with the help of your real estate professional, be prepared to act and react quickly. Tight inventories mean competition in many parts of the country. Get preapproved for a mortgage and otherwise get ready to make an offer when the right house comes along. (Bowden has more tips on how to successfully negotiate the purchase, but we’ve run out of room.) Call to discuss the next steps necessary for you to succeed in today’s vibrant market.
Next week we will get the scoop on the FOMC meeting along with construction updates and news from FHFA on home price appreciation. Stay tuned.