Linear Title Housing Market Analysis - Home prices have experienced notable gains so far this year, but a recent drop in fixed mortgage rates could offset the added cost for prospective buyers.
Home prices have experienced notable gains so far this year, but a recent drop in fixed mortgage rates could offset the added cost for prospective buyers. Linear Title and Closing encourages brokers and lenders to work closely with borrowers to ensure they take on home loans that work with their financial standing.
During the week ending October 4, the rate for a 30-year FRM was 3.36 percent, down from 3.4 percent, according to a report from Freddie Mac. In addition, 15-year fixed-rate mortgages averaged 2.69 percent, a drop from 2.73 percent the previous week. Both loan options have now been below 4 percent for all but one week so far this year.
"Fixed mortgage rates fell again this week to all-time record lows due to the mortgage securities purchases by the Federal Reserve and indicators of a weakening economy," said Freddie Mac vice president and chief economist Frank Nothaft.
A decision from the Fed to implement QE3 last month could stimulate the bond market for some time and hold FRMs close to current levels, providing a number of options for potential borrowers. This initiative paired with other forecasts has one industry expert expecting a spike in the housing market recovery rate next year.
David Shulman, an economist from the University of California, Los Angeles, believes the real estate industry will be buoyed between 2013 and 2014 by a surge in housing construction.
"Led by multi-family construction, housing starts are ramping up from 612,000 units in 2011 to 763,000 units this year and just under one million units in 2013," he said.
By 2014, housing starts are expected to exceed 1.3 million, which could add a full percentage point to the national Growth Domestic Product, Shulman added. Recent increases in property values, record low mortgages rates and rising household formation rates could also contribute to this development.
However, if there are any economic shocks in the coming months, which would deter homebuying activity, this may not come to pass. Meanwhile, if legislators fail to compromise on a tax and spending plan by the end of the the year, the economy could approach a "fiscal cliff" in 2013, which could have a negative effect on everything from the job market to the real estate industry.