The two driving forces behind higher rates right now are the improving economy (lower unemployment rate,better corporate profits and general confidence in the markets) and the Federal Reserve starting to hint it will pull out of QE3. This to me seems inevitable, if you understand the Fed is buying $85, Billion in mortage backed securities and treasuries to artificially keep rates low. We have to recognize they will have to pull out eventually and as unemployment falls, the economy shows signs of recovery, rates have to increase. Home prices continue to increase from 2012 to 2013 According to Zillow: Salt Lake City up 17% Los Angeles up 21% Las Vegas up 29% and Phoenix up 33%. I believe the increasing rates will have a little bit of a dampening effect on appreciation, but as of the writing of this article we are BUSY and 90% or more of our clients are buying, not refinancing. Trust me, the market is still very busy. Lots of buyers believe rates and prices will increase and they want to get in now versus wherever interest rates and home prices will be in 2014.
Inventory- This one will vary widely depending on the part of the country you are in, but generally speaking, inventory is still very tight. Salt Lake City has a 3 to 6 months' supply, CA, NV and AZ, for the most part have 3 months or less in inventory, which is considered a definite sellers' market and indicates increasing prices. I think 2013 and 2014 will see increased inventory as many homeowners are now able to sell at these higher prices and home builders are really starting to crank as credit thaws for them and they open new subdivisions. This could help the inventory situation, but I don't think we're anywhere near an oversupply anytime soon. I believe inventory will stay tight and a seller'market will continue for the year ahead. I think a long term perspective of where interest rates have been is paticularly useful right now. The average 30 year fixed mortgage rate since 1978 is above 7%. Some people think 7% is crazy, but looking at it in a historical context, it's certainly possible we could see those rates again if the economy continues to heat up. Doug Duncan, chief economist for Fannie Mae, recently addressed where mortgage rates may eventually end up: "I don't think the Fed ultimately would be troubled with a 6.5% mortgage rate." Why wouldn't the Fed be troubled? They have artficially kept rates low in order to stimulate the economy. As economic indicators begin to show signs of a recovery,the stimulus will be pulled back and rates will rise.By Josh Mettle
The two driving forces behind higher rates right now are the improving economy (lower unemployment rate,better corporate profits and general confidence in the markets) and the Federal Reserve starting to hint it will pull out of QE3. This to me seems inevitable, if you understand the Fed is buying $85, Billion in mortage backed securities and treasuries to artificially keep rates low. We have to recognize they will have to pull out eventually and as unemployment falls, the economy shows signs of recovery, rates have to increase. Home prices continue to increase from 2012 to 2013 According to Zillow: Salt Lake City up 17% Los Angeles up 21% Las Vegas up 29% and Phoenix up 33%. I believe the increasing rates will have a little bit of a dampening effect on appreciation, but as of the writing of this article we are BUSY and 90% or more of our clients are buying, not refinancing. Trust me, the market is still very busy. Lots of buyers believe rates and prices will increase and they want to get in now versus wherever interest rates and home prices will be in 2014.
Inventory- This one will vary widely depending on the part of the country you are in, but generally speaking, inventory is still very tight. Salt Lake City has a 3 to 6 months' supply, CA, NV and AZ, for the most part have 3 months or less in inventory, which is considered a definite sellers' market and indicates increasing prices. I think 2013 and 2014 will see increased inventory as many homeowners are now able to sell at these higher prices and home builders are really starting to crank as credit thaws for them and they open new subdivisions. This could help the inventory situation, but I don't think we're anywhere near an oversupply anytime soon. I believe inventory will stay tight and a seller'market will continue for the year ahead. I think a long term perspective of where interest rates have been is paticularly useful right now. The average 30 year fixed mortgage rate since 1978 is above 7%. Some people think 7% is crazy, but looking at it in a historical context, it's certainly possible we could see those rates again if the economy continues to heat up. Doug Duncan, chief economist for Fannie Mae, recently addressed where mortgage rates may eventually end up: "I don't think the Fed ultimately would be troubled with a 6.5% mortgage rate." Why wouldn't the Fed be troubled? They have artficially kept rates low in order to stimulate the economy. As economic indicators begin to show signs of a recovery,the stimulus will be pulled back and rates will rise.By Josh Mettle