Can you believe it’s Thursday already? And did you catch the full moon last night?
We have quite a few good stories for you today. We’ll first look at the impact of the government deciding not to taper off purchasing mortgage bonds, and then we’ll look at whether buying a home is cheaper than renting. Finally, we’ll look at the stats for underwater mortgages.
To Lock or Not To Lock. That Is The Question
CNBC posted a story on Yahoo Finance reporting that real estate stocks rallied and mortgage rates fell after the Federal Reserve announced that they will continue to buy U.S. Treasury securities and agency mortgage-backed securities which have kept mortgage rates well below what is considered an average rate for the past few years.
Many people looking to refinance or to buy a home were thrilled to have the chance to lock in at a lower rate. Economists took a bleaker view feeling that it means the housing market is not on the way to recovery yet.
But was it a good day for the housing market? What did it really say about the health of the recovery? It’s like when you were a kid, and you don’t have to go school because you are sick. Great! No school! Except you’re still sick. That is exactly what the Federal Reserve’s message was to the U.S. housing market.
“An insipid victory for housing markets,” tweeted economist Sam Chandan. “Fed doesn’t believe rebound can be sustained absent artificially low mortgage rates.”
It’s a valid question. The increase in interest rates over the summer dramatically slowed down the housing recovery with fewer home sales and mortgage applications. Home builders noticed fewer buyers coming in to see the model homes, and their confidence index went flat in the beginning of this month.
It’s unclear if this will help the volatile interest rate market or if it will calm it down. Your best next step is to talk to a reputable loan officer to find out what is the best solution for you. They diligently research factors that impact interest rates, and have access to many mortgage packages.
Is Buying A Home Cheaper Than Renting?
In March of 2012, SFGate reported that it is cheaper to buy than to rent in 98 out of the 100 largest U.S. metro areas. The two areas where there is too tight of a supply of homes are San Francisco and Honolulu.
Why is it cheaper to buy? Housing prices have fallen more than 30% since the housing bubble peaked in 2006. And rent has increased. The average monthly apartment rents for $1,263 in the fourth quarter, the highest since 2008, according to brokerage CBRE Group Inc.
So, is that still true today?
Apparently it is. It may not be as big of a savings, though. USA Today has a video analyzing home costs versus renting. Trulia Chief Economist Jed Kolko says mortgage rates would have to climb to more than 10% nationally to tip the market in favor of renting.
His other talking points included:
- One of the big new markets will be young people living with their parents. When they get jobs, they will start looking into purchasing their first home.
- It’s still 35% cheaper to buy rather than rent.
- Housing prices are still undervalued even though they have gone up.
- Interest deduction and people stay in their homes for a long time which increases your savings over time as you’re building up equity.
- In parts of California, it’s only 4% cheaper. Location matters, so know your neighborhood.
2.5 Million Mortgage Borrowers No Longer Underwater
The improvement is mainly due to soaring home prices, which jumped 7% during the quarter, according to the S&P/Case-Shiller national home price index.
The trend will likely slow as the pace of home price increases starts to steady, said Mark Fleming, CoreLogics’s chief economist.
CNN Money concluded that more homes will be put up for sale now because they know they can get cash out of the deal. In addition, sellers will no longer have the hit on their credit score if they do a short sale.
Where do you see the mortgage market going in the near future?