Over the last couple of months, I’ve been surprised to see mortgage rates dropping, again!
For many of us, the years of double-digit mortgage rates are still fresh in our memories. To think that these rates we’ve seen over the last few years will continue, is almost unimaginable. How long can interest rates remain so low?
I don’t know the answer to this, however, I do know that the Fed lowered their rates again, a pre-emptive attempt to keep the economy humming along. What this means, is that from this time last year, mortgage rates are back near all time lows, a whole percent lower than last year.
Crazy, isn’t it? And that’s after interest rates rose from last year to December.
But what does this mean for you? Lets get into it.
Houses are more affordable now
Price hikes stopping
Over the last few years, we’ve gotten used to house prices climbing drastically. This last year, however, we’ve seen that trend slow, or nearly stop. While Utah County still saw price increases, albeit lower than before, Salt Lake in the last quarter, has actually seen home sales decrease.
Over the next year or so, we don’t expect to see the price of homes rising, even thought the costs to builders continue to go up.
The market is catching its breath, and that means that homebuyers finally have a great entry point.
How much savings are the new lower mortgage rates? On a $350k to $400k home, the savings are in the realm of $200 per month. Not bad, eh?
Given the higher cost of rental homes, a mortgage rate is back into competitive territory with rentals.
How long will these lower mortgage rates last? I have no idea. How long will the Fed deem the economy to be at risk? My guess, and this is only a guess, is that we have about 1 year left of lower interest rates before they start going back up again.
Will home prices go lower?
I doubt home prices will be going down. There might be a few more deals out there than before, but my guess, is that home prices will be steady for a year.
When you combine steady home prices with lower mortgage rates, we have a buyers market.
Why do I not believe home prices will go much lower than they are? Simply because there are still too many people trying to buy homes right now. There is an estimated pent up demand of over 50,000 buyers in the market who are unable to find a home right now.
With not enough homes available, competition for the homes that are out there is still likely to be strong. But with the pressures of affordability remaining strong, the prices won’t be able to fall like they do during slower periods in times past.
Homebuilding is still going strong, and with labor shortages continuing, and land increasingly difficult to get entitled for new construction, home shortages will continue, which will keep the pent up demand high.
Even if the economy slows down, I don’t see the housing industry slowing very much, if at all. Good luck homebuyers. And if you’ve been sitting on the fence, waiting for the perfect time to buy, it might be staring you in the face right now.