2014 Mortgage and Housing Outlook
Rates Will Continue to Climb, Gradually
According to Freddie Mac, 30 year fixed rates increased 1% throughout 2013. The 30 year fixed rate was 3.41% in January and finished at 4.46% in December. The Mortgage Bankers Association of America expects this trend to continue and predicts that 30 year fixed rates will cross the 5.0% threshold sometime in the 3rd quarter of 2014.
Check the Interest Rate Record Books!
Guess how many times the 30 year fixed interest rate was below 5.0% in the history of the Freddie Mac Primary Mortgage Market Survey before Quantitative Easing (QE) was announced in November of 2008? If you guessed ZERO, you are right! We have all become a bit unrealistic about rates. But considering the above fact, today remains one of the most affordable times in recent history to borrow money on a fixed rate mortgage.
Are Rising Interest Rates Good for the Housing Market?
Initially, I would think most of us would say NO, rising rates are bad for the housing market. But, according to Steve Schwarzman, Chairman, CEO and co-founder of Blackstone Group, housing values have increased every year that interest rates have gone up in the last 50 years. Of course, rising interest rates are a byproduct of an overall improving economy and stock market, but it is still good news nonetheless.
More Dodd-Frank! Much Ado About Nothing?
Sections of the Dodd-Frank Act generally known as the Ability to Repay rule and the Qualified Mortgage Rule are effective for applications taken today, January 10th 2014. Basically, it limits fees and points to 3% of the loan amount, does not allow for risky products such as negative amortization, balloon or interest only loans and limits the maximum loan term to 30 years. Also, the maximum debt to income ratio is 43%. We cannot speak for other lenders, but just about every mortgage loan we originate already meets these requirements.
Housing Starts Up, Home Sales Up, Home Values Up
According to their 2014 economic forecast, the Mortgage Bankers Association of America (MBA) expects single family housing starts to increase 13% in 2014 as compared to 2013. Overall homes sales are expected to increase as well, but at a more modest pace. In addition, the MBA expects the median value on existing homes to increase 4.5% and prices for newly built homes to increase 5.6%.
Obtain a Thorough Pre-Approval before Making an Offer
Securing a mortgage approval continues to be a somewhat difficult process for the unprepared borrower or inexperienced loan officer. Make sure you obtain a thorough pre-approval with your credit, income and assets reviewed by a qualified, experienced mortgage lender. Too often, home buyers are denied for financing or have their closings delayed due to a lack of preparation.
I hope you all have a prosperous 2014!
Mike Dulla, President
Direct: (708) 531-8317