Interest rates rise again
Those who have been thinking of buying real estate take note. Last week marked the third consecutive week of rate increases for mortgage loans. As investors exchange their investments in bonds to invest in the recovering stock market, interest rates are rising. Some say this is a trend that is likely to continue as long as the stock market improvement seen this year sustains. Should the market falter however, as some predict, investors are likely to seek the safety offered by mortgage and Treasury bonds which would stabilize rates once again.
On Friday the Bureau of Labor Statistics released its most anticipated job report noting little change. Unemployment remained at 7.9 percent, at or near the same level since September. This indicates there will be no slowdown in the Federal Reserve's purchasing of $85 billion a month in Treasury and mortgage bonds in their effort to ensure that rates remain low unless the job market "improves substantially." When the Fed pulls back on the assistance, there is little doubt rates will increase.
The good news is, there are still opportunities to get zero down financing at a darn good interest rate if you are one in a select group. The Veterans Administration offers 100 percent financing for qualifying veterans. The maximum amount for those loans is $417,000 so you should be able to find a house you like and still not have to make a down payment. At 100 percent however, you will have to add a mortgage insurance premium to your payment of principle, interest, taxes and insurance.
Buyers with less than 140 percent of the area median income may qualify for a zero down loan through IHFA. Idaho Housing and Finance Association offers down payment assistance that equates to 100 percent financing without mortgage insurance. This is perhaps the most affordable way for folks in Kootenai County, with annual incomes less than $69,720 for one or two people, or less than $81,340 in income for a household with three or more, to buy a home. The home price limit for these folks is $316,000. Friday's published rate for IHFA loans was 3.25 percent. You do not have to be a first time homebuyer to qualify and may even be able to refinance with this program.
The recent upticks in interest have not hurt our productivity yet. A quick review of the Coeur d'Alene Multiple Listing Service shows we closed 5 percent more transactions this January than last but, the modest mortgage rate increases wouldn't have applied to the loans on most of those transactions since the typical loan will take roughly 30-45 days to process. The rate at the beginning of January though was still slightly higher than the record low seen in November.
We are in a unique time for buyers since there are still affordable homes available and interest rates remain exceptionally low. The inventory is dwindling though and builders have begun to react by building new homes that new buyers can afford. The low interest rates we have enjoyed for at least the past year allow many home buyers to invest in their American Dream. A significant rise in rates will price many of these folks out of the market as the monthly payments rise accordingly.
The foreclosures that have been a burden on housing prices, keeping them down, are easing significantly here. In 2012 we saw the sale of foreclosed properties decrease by 34 percent. That, coupled with comments from local bankers, indicate the foreclosure boom is coming to an end which will allow owner occupied homes to regain some of their previous value. We still noted 140 homes for sale in Post Falls, Coeur d'Alene and Hayden though, for under $150,000 so options exist for those who are ready to buy now.
Naturally the rise in interest rates will be gradual, but it does cause us to take note when we see the creeping up of rates that we have seen this last three weeks. To those on the outside, new to the market, a 4 percent interest rate will seem high and at the rate we are going, we could get there within the next few months.
Trust an expert ... call a Realtor. Call your REALTOR or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a REALTOR member who will represent your best interests.
Kim Cooper is a real estate Broker and the spokesman for the Coeur d'Alene Association of REALTORS. Kim and the Association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of REALTORS, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling 208-667-0664