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Are Record Low Mortgage Rates Going, Going, Gone?

Posted By Clayton Closson On February 5, 2013 @ 1:34 pm In Home Buying,Home Buying/Selling,Home Sales,Mortgage News,Mortgage Rates | No Comments

usa today mortgage rates This is something we’ve known was going to happen for months. Mortgage rates couldn’t stay in the historical cellar forever. They had to rise eventually.

USA Today reported a few days ago that rates have been ever so slightly ticking up for the past three weeks. The average 30-year fixed rate reported by Freddie Mac went from 3.31% to 3.5%. Many financial experts doubt they’ll get back down to their all-time lows. Bad news for anyone who hasn’t refinanced or bought their dream home, right? No so much.

Rates are still down at levels my mother (who clearly remembers the late ’70s and early ’80s, which saw mortgage rates as high at 18%) can’t believe. You can still get rates below 4%, which makes my mother chuckle. “Our mortgage was 12% and we thought we had the best deal in the world,” she told me. I smile and remind her of my 2.75% (APR 2.9%) 15-year fixed VA loan. I love my VA loan. Love it!

Anyway, lots of folks can still take advantage of today’s rates, even if the lowest rates have passed them by. And this is shaping up to be an interesting home buying season. Bloomberg reported on a house in the D.C. area that had 168 offers and sold for twice the asking price. Huh? Here’s some of the article:

bloomberg home prices The U.S. housing market, entering its busiest season, is tipped so far in favor of sellers that almost a third of listings in areas from Washington, D.C., to Denver and Seattle are under contract in two weeks or less.

One home in Washington attracted 168 offers in December and sold for almost twice the asking price. About 70 people lined up last month for a lottery to select buyers for four available houses in a San Ramon, California, subdivision where, in August, bidders camped for weeks to secure purchases.

A plunge in U.S. home listings to a 12-year low is driving up prices and preventing transactions from returning to historically normal levels. Many potential sellers are holding off until values rise more, while investors are snatching up distressed properties before they reach the market. Builders, reporting their best orders in years, can’t increase production fast enough. As buyers seek to take advantage of record-low mortgage rates, the supply and demand imbalance threatens to further limit deals as the key spring selling season approaches.

I’m not in the market to buy or sell a house, so the news doesn’t personally affect me. And frankly, I’m not sure my home is even back up to the value I paid for it back in 2008. But that’s ok. I love my house and plan on staying there for a long time. I do have some neighbors who’ve had their homes for sale over the past year or so. One family moved to another state and ended up renting because they couldn’t afford to sell it. Those days are clearly becoming something of the past.

The great news for home buyers is that prices are still lower than they were back in 2006 in many parts of the country. And mortgage rates certainly are lower than they were back then. So there are lots of great deals on homes and extremely low rates that make buying a home more affordable. Here’s an example of how rates can affect the amount of home you can afford:

Let’s say you want to buy a $200,000 home. If rates were back up around 6.5% (which they were when I started at Quicken Loans in 2006) and you got a 30-year fixed, your monthly mortgage payment with principal and interest would be around $1300.

But lets say you buy at home at today’s super low rate of, say, 3.375%, with an APR of 3.71%, your new payment, with principal and interest would be about $885…same loan amount for $400 less a month! So either you pay less for your $200,000 home each month or you could buy a more expensive home. Either way, you win when rates are this low.

Don’t wait, friends, if you think you want to refi or buy. They way things are going, you’re probably going to regret it if you do.

 


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