A local perspective on rising home prices and rising rates from Michael Tarleton, Sr. Mortgage Loan Officer with the Bank of England.
Average U.S. home prices gained 2.5 percent in the top 20 U.S. Markets from March to April 2013, according to the latest S&P/Case-Shiller Home Price Indices. From a year ago April 2012, home prices in these markets gained a whopping 12.1 percent. “The recovery is definitely broad based,” according to David Blitzer of S&P Dow Jones in a release. “The two composites showed the largest year-over-year gains in seven years.”
The housing market has certainly seen its ups and downs over the past several years, but recent events have made things even more interesting than normal. Talk from Fed Chairman Ben Bernanke about possibly tapering its QE3 economic stimulus has resulted in mortgage rates climbing. In May 2013 the 30 year average mortgage rate per bankrate.com was 3.40%. This week it reached 4.51%.
What does this mean for home buyers and sellers?
Hopefully it means our economy is truly recovering and our financial markets will eventually return to a free market system that does not require government intervention. However, the reality is it is nothing but Fed “talk” that has caused this volatility in rates. And all the Fed has stated is that it “may” pull back its buying of mortgage backed securities later this year from $85B per month to $65B. That is still a huge amount of economic stimulus.
For the home buyer, if you are going to buy a house in the next 5 to 10 years, there is not a better time than now.
Even though rates may be higher than they were a month ago, they are still unbelievably low. The graph below from mortgage-x.com shows the national average mortgage rates from 1963 to 2012 and rates are still well below what was considered “normal” or “average” in years past.
The volatility in rates that has occurred is also an indicator of where rates are headed when the Fed finally ceases it quantitative easing. Sooner or later as the economy grows, the Fed will have to turn its attention to fighting inflation rather than keeping rates low and the way it fights inflation is by raising interest rates.
Why wait until then?
The Bank of England, has loan programs for all types of borrowers and we always go the extra mile for our clients. If you have any questions about the interest rates and how they affect your chances of owning real estate in our area, or maybe you just a need a fast and free pre-qualification, please reach out. You can email me at mtarleton@englending.com
Mike Tarleton
Sr. Mortgage Loan Officer
Bank of England
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