Unanticipated rate drop equals opportunity
Even though higher than last year at this time, interest rates for 30-year fixed rate mortgages dropped last week to the surprise of most. Last week's 4.21 percent rate is the lowest seen in six months giving buyers a bit of stress relief as rates continued to rise in previous weeks. Some attribute this drop to lower than expected housing market results in many parts of the country.
Rising rates have been blamed for the national slowdown in housing recovery although many believe that reduced available inventory is also a part of the equation. Our current rate is equal that of last November, a rate most believed would not be seen again with the Federal Reserve's tapering of Treasury securities.
Higher interest rates do make it more challenging for people to afford homes although lower rates do not help those whose credit ratings are marginal. That is of course unless they can qualify for loans offered through the Federal Housing Administration, Idaho Housing and Finance or a Rural Development loan through the United States Department of Agriculture whose underwriting requirements are less rigid than those for conventional loans.
Experts believe that this new, lower rate will provide a stimulus to the housing market that had slowed through some brutal winter weather in parts of the country and endured increasing interest rates for most of this year. Now, down from 4.29 percent the prior week, the .07 percent drop could make a difference in housing sales performance.
In other news last week it was reported that home mortgage delinquencies were well below previous reporting periods. According to a press release from the National Association of Realtors: "The mortgage delinquency rate nationwide stood at 3.61 percent at the end of the first quarter of 2014, down more than 24 percent compared to the same time a year ago, according to the latest mortgage report from TransUnion. That marked the ninth consecutive quarter that the delinquency rate declined."
As reported here we have seen a significant reduction in sales of distressed properties when compared to last year and are encouraged that homeowners are recovering equity that allows them to avoid selling in distress. The mortgage delinquency rate now stands at the same level as it was in the second quarter of 2008 which for our market was about the time the housing recession began to hit hard.
As to the future of interest rates, we quote the Wall Street Journal story on Freddie Mac's Chief Economist Frank Nothaft; Mortgage rates will "just gradually rise, very slowly" this year, he said Wednesday during an economic forecast event at the U.S. Chamber of Commerce. Mr. Nothaft expects rates to rise to between 4.6 percent and 4.7 percent by the end of the year.
That gain is much weaker than he forecast in January, when he projected rates to reach 5.1 percent by the end of the year. "I do think economic growth will pick up...and that the Fed will continue to taper," Mr. Nothaft said. "That will gradually put some upward pressure on mortgage rates."
For now at least, many thinking of purchasing a home are presented with another opportunity unforeseen by us, to buy a home with a 30-year loan at less than 4.25 percent. We, among many others, were sure that opportunity was lost. If you have already qualified for a loan and are shopping now, the home you want may have just become cheaper. Last week's new rate compared to the previous week will save you about $7,000 over the term of the loan.
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.