Category Archives: mortgage rates

Mortgage rates causing hesitations in first-time homebuyers

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The rising of mortgage rates at the end of 2016 is causing some would-be first-time homebuyers a little hesitation in house hunting this spring.

In October 2016, 55 percent of potential homebuyers were planning to make their first home purchase in the spring. This number has dropped to 44 percent this month, according to realtor.com®. The website reported that the average 30-year conforming rate rose .8 percent from September to December 2016, and would cost, on average, an extra $720 per year in interest.

“Last fall, we saw a large jump in the number of first timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” said Jonathan Smoke, chief economist for realtor.com®. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing and affordability is one of their largest barriers to home ownership. This number could continue to decline with anticipated increases in interest rates and home prices.”

While first-time buyers accounted for nearly one-third of buyers in November 2016, first-time buyers were almost five times more likely than repeat buyers to report that they struggled to qualify for a mortgage.

In addition to mortgage rates, the continued lack of inventory on the market is impacting would-be first-time homeowners. Inventory on realtor.com® in December 2016 was down 11 percent from December 2015. Another aspect of the low amount of inventory is that the cost of homes is still above average. In December 2016, homes on the market cost 9 percent more than they did in 2015.

Realtor.com® also reported that the average listing views saw an increase of 40 to 80 percent during the last few weeks in December 2016, compared to December 2015, as more buyers are striving to purchase the same homes.

 

Real estate predictions for 2017

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“Millennials will be buying properties. 2017 will be a year when we see more loan applications and purchases for millennials,” said Abby Shemesh, founder and CEO of Amerinote Xchange, on what trends he anticipates for the real estate industry in 2017.

Another trend Shemesh expects is that baby boomers will be downsizing this year. However, he said where the boomers and millennials buy may not be where you would expect.

“A lot of folks are saying that millennials will be purchasing in ‘hot’ cities, I disagree. A lot of markets are so saturated and overpriced. My assessment is that you will see a huge increase in cities that are not being focused on. It will be a huge migration, depending on the job situation for millennials. They may be moving to not-so-sexy cities.”

He said bigger cities in Pennsylvania will still see growth this year, but not at the rate they have experienced in the past year. “It will be steady in Philadelphia and Pittsburgh, but there may be slower periods. As for smaller areas, they should see more inventory this year, so they may be attractive.”

As for the baby boomers, he said they may still be heading south, but not as south as before. He thinks the southeast may see an uptick in boomers, as they strive to find housing that is affordable.

Shemesh also believes we will see mortgage rates increase. He predicts they will be as high as 4.75 percent, especially if the economy is doing well, but doesn’t see it going any higher.

“The president-elect should not make too much trouble for real estate market, at least for now,” he said. “I feel that his business practices align with how real estate markets can grow. But if he does something in politics that would significantly affect the American economy, it would affect real estate market eventually,” said Shemesh.

How can Realtors® prepare for the housing market this year? Shemesh believes it’s all in how you do business.

“I’ve seen agents blow by their competition by thinking outside the box. Broaden horizons and get more creative. All Realtors® in all areas can benefit from that advice. Let go of what you think you’re supposed to do. Apply yourself in a way that would be creative. Don’t be another agent waiting in line to submit a bid.”