If you’ve been considering purchasing a home, 2016 is the time to act. Although mortgage rates are increasing, the rates offered are still near historic lows.
Home prices have begun to normalize as many Americans regain equity in their homes, because of the appreciation in value, you’ll see an increase in sellers placing homes on the market.
In addition to having more homes on the market The Fed has stated that the Fed Fund Rate will increase this year, driving up mortgage interest rates.
- Foreclosure Rates Are Down
Recently Corelogic reported that foreclosures are at their lowest rate since september 2007. The market has observed a fairly consistent decline in foreclosure rates since June of 2015.
CoreLogic also reports that the number of mortgages in serious delinquency ( defined as mortgages late by 90 days or more past due including loans in foreclosure or REO) has dropped by 21.6 percent from April 2015 to April 2016. The total number of homes foreclosed on since 2008 is about 6.2 million.
As a result of a drop in foreclosures there is trust in the market and banks are more willing to lend.
- The Fed Fund Rate Remains Low
The Fed Fund Rate is a large factor in determining mortgage rates. Inflation is the enemy of mortgages.
Mortgage rates are based on the price of mortgage-backed securities. MBS’s are U.S. dollar-denominated, when inflation occurs, the value of the mortgage bond drops and mortgage rates increase.
This lack of predictability is often why home buyers borrow when rates are low, opting for a fixed rate mortgage loan . Although the Fed Fund Rate remains low so far, it is projected to increase significantly by 2017.
- A Lower Than Average Jobs Report
The Jobs Report is released the first Friday of each month, the latest jobs report released June 3rd showed the weakest growth since 2012. When looking at the market as a whole, employment is a measure of economic strength and the Jobs Report is how that success is measured.
The Fed places such high authority on the Jobs Report that the Fed even buys mortgage-backed securities and bonds to keep mortgage rates artificially low when unemployment rates are high. As the unemployment rates decline mortgage rates will surely increase which is why locking in a historically low mortgage rate now is a wise move.
- Negative Equity is down
For the first time since the collapse of 2008 the majority of homeowners are positive in their equity. Nearly 92 percent of homes that are mortgaged have positive equity.
Negative equity refers to borrowers that owe more on their mortgages than their homes are worth. This can occur because of an increase in mortgage debt, a decrease in home value or a combination of both.
If you’re considering buying a home or refinancing an existing loan, strike while the iron is hot. 2016 will arguably be the best time to buy for the foreseeable future.
Rent rates continue to skyrocket, in 20 of the 35 largest housing markets rents outpaced home values in 2015.
With even more options available today for first time home buyers now is a great time to purchase.