Where Do We Stand With Mortgage Interest Rates?
While not universally true, the vast majority of our clients who buy homes, utilize a mortgage loan to pay for some portion of their real estate purchase. The big news on that front in the last year and a half has been the plummeting interest rate - a move the government made, as part of the COVID-related economic stimulus plan.
It's a mistake, though, to look at the current low rates (as of publication today, FreddieMac lists the 15 year fixed rate at 2.88%) as merely a buyer's issue. Certainly the typical buyer does indeed take interest rates into account when shopping for a new home - how much they pay in interest will ultimately affect how much house they can afford. But it's become a seller's issue as well, because the historically low rates have meant nearly anyone with a property to sell, finds themselves inundated with offers, often for well over the asking price.
That seems like an enviable problem to have - and it's certainly better than no offers, or only lowballs. But it still creates a dilemma, because if a seller accepts a significantly over-value offer, the property may not appraise high enough for the buyer to be able to obtain financing (and the buyer may not have the cash reserves to make up a big difference.) So it's meant that in this flood of offers, sellers have had to become VERY savvy about what constitutes a solid offer, and what will fall apart and force them to return the property to the market - never a fun process.
A lessor talked-about effect has been a huge rush for existing homeowners to refinance their mortgage loans, for a more favorable rate than when they initially closed on the property. If it's been some time (or if your credit score has significantly improved) you are likely to be able to have a much less expensive monthly payment - or to be in a position to take out some equity for needed improvements or other financial goals. Certainly the high-pace sales combined with the popularity of refinancing has kept our colleagues in the lending industry hopping for the past 18 months - it's been "busy season" every day for those folks! And it's certainly true that many people elected to refi an existing property, rather than sell and buy something else - which means that was one less potential property in our already slim inventory (but obviously the right choice for those individuals/_
Those are the rough outlines of where these very low interest rates have landed our local Kitsap market (with similar issues nationwide.) What do the numbers look like in black and white? Freddie Mac publishes this information every day, and it's worth keeping them on a bookmark if you follow the housing market, and are preparing to have a real estate transaction in the near future (...in which case, you should totally be following the housing market!)
Here's a screenshot of what today's numbers look like, along with a nice chart of the past year, and a (sorry) hard to make out 50 year history.
It's worth visiting the webpage, because the chart is interactive. You can mouseover any point of the line graph, and have it show you dates and rates for that point. You can also swap the annual data for other time spans, including better 50 year data:
So even with rates creeping up slightly lately, we can see that they are still very good historically. This continues to portend positive things for the real estate market: more buyers can afford homes, and more sellers will have adequate offers for their properties.
All of this begs the question: will they stay this low? Is it okay to wait? What will the Fed do next? Following a meeting last week, they have announced that they will continue keeping steady with these very low rates until there is clear data that we have recovered from the economic effects of Coronavirus. We at Dupuis Team think this is fundamentally good news for all of our clients. It means you DO have a little time to become a buyer - which is welcome news for those of our clients that need to wait a bit for personal reasons, or who have been struggling to make a winning bid. It means our sellers can continue to count on having ample bids to pick among - and similarly, will not be adversely affected if today isn't quite the right time to list the property.
We have to think those effects are positives for everyone. It takes a "forced hand" element out of your transaction, and can offer some tranquility and calm about the decision. You can decide when the best time for YOU is, and not feel like you have to rush "or else, based on interest rates.
We caution that interest rates are not the only market determinant - you've heard us talk many times about the biggest three factors: interest rates (check), inventory, and jobs. Those second and third factors can feel like they have less personal impact than the current mortgage interest rates, though - so it is worthwhile keeping a close eye on that.
Are you thinking about diving into the market? Give us a ring at Dupuis Team, and we'll get you started today!