Interest rates have inched up to over 5%. That’s higher than they have been since May 2010, nearly one year ago. For the week ending 11 Feb the average was 5.05% with the 0.8 average buy-down rate included. Loans not backed by Fannie Mae or Freddie Mac were even higher with a spike of 5.25% last week.
For buyers this increase is not overwhelming. Most can easily absorb the increase of $20-$35 in monthly payments created by it. The listing prices tend to decrease slightly to compensate for MINOR increases, lowering the down payment slightly.
For sellers however, this is not good news. As mentioned, selling prices tend to drop slightly to compensate for the interest increase. In a neighborhood with many homes for sale this slight drop can lower ALL home values in the area, which drops the price slightly more! This will drop the amount the banks are willing to lend. And for the buyer that was borderline, well, your home just may be out of their price range now.
This increase is compounded by the uncertainty of the government’s role (via Freddie Mac & Fannie Mae) which is being questioned. What will be the result on the housing recovery?
Our take on what it means to YOU?
…If you are thinking about buying, the stable lending environment of today probably outweighs any minor gain by price reductions in the near future. And we expect interest rates to continue to climb slowly.
…If you are thinking of selling any time soon, stable prices and raising interest rates make this the ideal time. We don’t expect prices to rise significantly until the foreclosure mess is cleaned up, and that won’t be for another year or so in our opinion. If you are waiting for the high selling prices of 2005, well, studies we have seen expect that to happen around 2035!
Questions about YOUR best action? Contact us today for your free analysis.
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