Even as interest rates rise, so do home prices
Interest rates for 30-year, fixed-rate conforming mortgages rose from 3.67 percent to 3.73 percent during the week according to the Mortgage Bankers Association. The average rate for 30 year loans backed by the Federal Housing Administration rose from 3.48 percent to 3.53 percent Mortgage applications rose too, up 3.4 percent last week. It seems that buyers are seeing the light; that waiting to make a purchase means paying more in the long run for homes.
Home prices are accelerating in most local markets. CoreLogic, a real estate data provider, says average home prices rose 8.3 percent in December compared with a year earlier, the biggest annual gain since May 2006. Prices rose last year in 46 of 50 states. Steady increases in prices are helping fuel the housing recovery. They're encouraging some people to sell homes and enticing some would-be buyers to purchase homes before prices rise further.
Of course, as activity increases and inventory dwindles, prices rise, making it profitable again to build new homes.
With double digit increases in many California markets, and with nearby Seattle reporting average price increases of over 13 percent, our 5 percent gain in average price last year pales by comparison. We remind you though, that the trends witnessed in those markets have historically reached Coeur d'Alene as well. Most agree, we are early in the housing recovery. Another year is likely to see higher gains in housing prices and interest rates alike.
It is likely that the increased competition for homes will continue. Bear in mind that many of those who defaulted on homes early during the housing bust are now eligible to buy again. Under the guidelines for Fannie Mae and Freddie Mac the standard waiting periods to purchase a home are:
n Bankruptcy - 4 years
n Foreclosure -- 7 years
n Short Sale or Deed in lieu of foreclosure - 2 years if the loan to value is 80 percent or 4 years if LTV is 90 percent.
Considering that our worst year for home sales reported by the Coeur d'Alene Multiple Listing Service was 2008, the probationary period for many of these folks has passed. A foreclosure with extenuating circumstances; divorce, medical issues or job loss, requires only a 3 year waiting period. That puts most of the folks who helped create the surplus inventory back into the market competing for the inventory that remains. Add investors and speculators into the mix with the aging millennials vying for their first home and you have all the ingredients for a burgeoning sellers market.
Of course not all price ranges are impacted equally by these factors. Our inventory of million dollar and higher homes will take longer to absorb than our modestly priced listings, but as people who bought low cash in, they are eligible to move up into higher priced homes - particularly with low interest rates.
As employment figures improve and new construction provides affordable homes, we are bound to reach a normal real estate market once again.
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