What can we expect from the housing markets as this year’s selling season kicks off? With housing markets across the nation showing signs of improvement, we’re faced with quite a different picture to what we’ve become accustomed to. What follows are a few unfamiliar trends that we’ve seen emerge over the spring.
Housing affordability has never been so high, thanks to super-low mortgage rates and steadily declining home values. As such, more buyers are emerging out of the woods to take advantage of the situation – and all of a sudden, there’s a lot of intense competition where there was none.
Investors especially, are muscling on to the scene in growing numbers, tempting sellers with their all-cash deals, which means that those needing to finance a deal are facing stiffer competition than they’ve had to deal with in quite a while.
According to Jed Smith, MD of Quantitative Research at the NAR, the circumstances have never been as encouraging for investors as they are now:
“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest.”
For first-time buyers especially, the competition for the best deals on the market is going to be a lot tougher this summer, adds Smith.
Homeownership Becomes More Desirable
One of the quirks of the housing market at present is that homeownership these days is for many people, more affordable than renting a home. Due to this, growing numbers of renters are beginning to desire a home of their own.
We can already see signs of this – according to a survey by Kingsley Associates, just 59.5% of tenants are planning to renew the lease on their home, the lowest number recorded since the beginning of 2009.
Mortgage Costs Increase
Despite home affordability remaining at record lows overall, some home buyers are seeing a slight increase in their mortgages. Fannie and Freddie, and the FHA have all increased their loan fees in recent weeks, and these costs will be passed on to homeowners.
Ed Conarchy of Cherry Creek Mortgage, Gurnee, Illinois, states that this will be a problem for buyers who lack high credit ratings, as they’ll be forced to take an FHA loan, leaving themselves stuck with the increased fees.
FHA mortgage premiums have gone up to 1.75% of the total loan amount, and so those buyers who can only afford a small down payment can expect slightly higher premiums with an FHA mortgage.
In addition, borrowers with more expensive mortgages can also expect to pay increased premiums soon. Starting in June, the FHA is going to raise its annual insurance costs for mortgages valued over $625,000.
Source: Bankrate, Inc.
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