How can this be? Interest rates are rising and so are home prices, why is this such a great time?
1. Interest rates will not stay this low forever because that what rates do, they go up. In fact, the interest rate for a 30-year fixed mortgage is expected to go up to 5 percent by the fourth quarter of this year and 5.3 percent by the end of 2015, according to a recent forecast by the Mortgage Bankers Association (MBA). Typically, the feds will start raising rates about six months after they stop buying mortgage bonds, which is projected to happen sometime in 2015. Rates should gradually increase; however, a quarter of a point on an interest rate can mean about $100 more each month on a home loan.
2. Credit score requirements are easing for mortgage borrowers. In March, the average credit scores on purchase mortgages stood at 755, down from 761 in the previous year, according to data from Ellie Mae, a mortgage-software provider. Credit scores for Federal Housing Administration loans dropped even lower to 684, compared to 696 a year earlier. Why did this happen? It seems that the demand for refinancing are about 70 percent slower than a year ago and are expected to continue to decline, according to a statement by the MBA in April. Banks are trying to attract more buyers into the market by lowering credit score minimums.
3. Spring and summer are the best times to buy a home. People with children see that summer is a great time to move before they have to settle back into the routine of school. Buyers also see that there is more properties on the market to choose from and as a result this is a great time for both buyers and sellers.
4. Buying is still cheaper than renting. Comparing prices of rentals and what mortgage payments would be, buying a home is a much better bargain than renting, assuming homebuyers get a decent mortgage rate (4.5 percent or below) on a 30-year fixed term loan with 20 percent down. However, the gap is getting smaller between the two choices because of rising mortgage rates and home prices. Each area is different but it still holds true here in Lake County.
5. Home prices are still competitive. Home prices have gone up but they haven”t skyrocketed, they are still within reach of many home buyers. As previously reported in this column, the median price of a home here in Lake County for May was $167,250 and was up 24 percent from $135,000 recorded in May 2013. The Lake County housing inventory rose to 6.63 months so there are more homes to choose from during your search depending on where you live. If you are looking into buying a home, be prepared to offer quickly, and get preapproved by a lender which will make things go easier.
Ray Perry is the 2013 Realtor of the Year for Lake County and works for CPS Country Air Properties located in the Riviera Shopping Center. He can be reached at 277-8000.
