No, it’s not floods, tornadoes or alligators, but interest rates that are the common denominator among home buyers these days.
According to a survey conducted by Berkshire Hathaway Home Services, eight in ten prospective home buyers thought rising interest rates were the number one challenge facing the real estate industry. 84% of current homeowners answered the same way. Those searching for a home worried that rising interest rates – and the ensuing mortgage rate increases – would affect their ability to afford a home. Though interest rates are currently low from a historical perspective, they’re not as low as they were several months ago. Only 20% of prospective buyers said the recent rise in rates motivated them to make a purchase before further increases.
All that being said, demand was there in February. Applications for new mortgages rose 17% compared to January, driven by strong employment gains. In a perfect world, gains in employment and income continue would continue throughout 2017 and offset the Federal Reserve’s incremental interest rate hikes.
Now let’s take a look at the numbers.
Housing inventory increase slightly in February, but is still 6.4 percent lower than February 2016. The long-term inventory trend continues to drop as well, having dropped year-over-year for 21 straight months. Thanks to low inventory and affordability issues, existing home sales dropped by 3.7 percent in February compared to a month prior.
As we head into the hottest months in the real estate industry, prospectiveborrowers should seek preapproval from a lender, understand what their budget is, and start working with a realtor about their housing needs. The early bird gets the worm!
As for lenders, caution remains supreme, and probably will for some time. Though the new administration in Washington has taken a less hawkish tone toward the banking world, the Consumer Financial Protection Bureau remains in existence and continues to enforce fair lending standards, TRID, RESPA and other regulations. Acuity National Real Estate Solutions is a nationwide title insurance agency that uses technology and premiere customer service to help lenders stay compliant, take advantage of demand, and win repeat business. To learn more about our services, visit our homepage today.