The Columbia SC mortgage rate outlook this spring is creating a sense of urgency on the part of prospective home purchasers. With interest rates having edged up slightly and home prices rising continuously, many borrowers are making a beeline to apply for home loans. Their rationale is the sooner they act, the more they potentially will save – on interest rate charges and home price increases.
Interestingly, home purchasers are electing to take out adjustable rate mortgages (ARMs) in unusually high numbers in hopes they can handle the Columbia SC mortgage rate outlook of potentially higher rates and save money on their mortgage payments in the first few years.
Mortgage activity has been on the rise in recent weeks, having increased nearly 3.5% from one week to the next, based on the most recent report from the Mortgage Bankers Association (MBA.) Despite the week over week increase, total mortgage volume is roughly 18% lower than it was during the same period in 2016. Experts say the lower volume has more to do with the decrease in the number of refinance applications than it does with the Columbia SC mortgage rate outlook. While most borrowers refinanced a year ago when interest rates were at or near record lows, there is still some refinance activity in the mortgage marketplace. The volume of refinance loans is down 34% so far this year, but mortgage lenders have seen an increase of more than 5% in recent weeks – based on consumer fears that the Columbia SC mortgage rate outlook might include higher interest rates moving forward.
Some analysts attribute the rush to refinance to recent remarks made by key Federal Reserve officials indicating what wound up being another interest rate increase in March. In addition, other economic factors came into play such as the recent Gross Domestic Product (GDP,) manufacturing results and inflation projections. While mortgage interest rates really are not directly tied to federal funds rates – upward or downward – a rate increase by the Federal Reserve could still make mortgage interest rates increase, only time will tell on this for sure. Fed funds rates are generally more short-term in nature, while mortgage rates are longer term, of course.
How will the Columbia SC mortgage rate outlook impact the usually brisk spring real estate sales season? While the true impact remains to be seen, economists say demand on the part of home buyers is still high. The problem, they contend – which is of greater concern than the prospect of higher interest rates – is affordable homes are still in short supply. The inventory shortages that occurred during much of 2016 have carried over into 2017, and don’t appear to be improving anytime soon. Since a good portion of the housing demand is on the part of millennials and first-time buyers, the inventory shortage is of major concern.
As mentioned above, one of the results of the recent Columbia SC mortgage rate outlook is more buyers are opting for adjustable rate mortgage solutions in an effort to save money since the ARMs offer lower interest rates for a certain time period. Statistics reported by the MBA showed that the ARM share of recent mortgage lending applications was the highest since 2014. The results simply highlight the concern borrowers have for higher interest rates, and in spite of the indications, home demand remains high going into the spring. In addition to the ARM share of applications reaching a three-year high, the average loan size for applications to purchase homes reached a high of $313,000. This is the result of two different factors. First-time buyers tend to impact the higher mortgage amounts less than buyers in the market who are moving up and buying bigger, newer and more expensive homes.
The Columbia SC mortgage rate outlook may have a definite impact on the spring market, however, all early indications are that due to high demand and the overall impression that interest rates – despite their slight upward tick in recent months – are still relatively low. Many borrowers remember when interest rates were in the 8%-9% range for a number of years. With that in mind, rates roughly 50% as high are veritable bargains today – in spite of the higher home prices that exist in today’s real estate market.
More first-time borrowers are going to faced with the dilemma of continuing to pay higher rents versus putting their monthly payments into paying a mortgage and building equity in a home of their own. The home participation or home ownership rate reached an all-time low in 2016, but the trend seems to be one of slight improvement during 2017. Time, as usual, will tell as first-timers decide what to do and when to do it. Housing inventory, as already cited, will determine a great deal as the market needs starter homes and more affordably priced houses to meet the demands of some of the first-time home buyers. In addition, there needs to be a larger supply of “move-up” homes for that segment of the buying public that’s ready to expand into a larger home, a better neighborhood or a newer home.
You can find more articles pertaining to the Columbia SC mortgage rate outlook in the "Columbia SC Mortgage Info" section of articles just below Columbia SC Real Estate Categories in the column to your right. Remember to also check us out by finding us on Facebook and following us on Twitter..
The Columbia SC mortgage forecast – at least for the near future – is that home loans will continue to be easier to obtain than anytime in the last ten years. The Mortgage Bankers Association (MBA) recently published a report showing data that seems to suggest mortgage lenders have relaxed many of their lending regulations and standards for every type of loan – including FHA and USDA home loans – both backed by the U.S. government.
Between 2008 and 2016, it was estimated credit availability to take out mortgages tightened by close to 90%, according to an MBA report. However, today’s Columbia SC mortgage forecast is brighter than before, and more people are qualifying for loans than in the last decade. Officials say even those borrowers who may have been turned down for a mortgage loan a year or more ago are likely to be granted financing in today’s lending environment.
Let’s Look at the Numbers The MBA publishes its Mortgage Availability Index (MCAI) every month in an effort to show the current mortgage lending market as a single number. The MBA obtains data from over 95 lenders nationwide, looking at loan-to-value ratios, FICO credit scores and lending limits as a measure of how much or little flexibility there are in loan guidelines.
The most recent report shows the MCAI at a fairly high 177.1 – a huge increase from what many term its benchmark index of March 2012 of 100. What this means is that mortgages are almost twice as easy to obtain as they were just five short years ago.
The Columbia SC mortgage forecast is for relaxed lending standards to not only continue to be a part of a mortgage lender’s loan guidelines, but they’re making an impact in other areas as well. Mortgage software company Ellie Mae just released a report showing mortgage lenders approve 77% of applicants – an increase of 6% in roughly 18 months. In addition, the MCAI rose 1.1% in only one month. The report also showed that lenders have relaxed lending requirements for loans above the national conforming loan maximum of $424,100.
Availability, as a result, has increased for nearly every type of loan offered:
- Government mortgage availability rose 0.2% from the prior month
- Conventional mortgage loan availability was up 2.3% from the previous month
- Jumbo mortgage availability increased 4.7% from the prior month
Government mortgages referenced above include the three major lending programs – the FHA loan, the VA loan and the USDA mortgage.
USDA Loans Increase Government Mortgage Availability
First-time home buyers really like the little-known USDA home loan program. USDA loans require no down payment, one of only two loan products with that feature – the other being the VA loan – which is available to current or previous members of the Armed Forces. USDA loans are also known as Rural Housing Loans and eligibility requirements are based on the home’s location. Primarily, neighborhoods throughout the U.S. that are in less densely populated areas are the easiest in which to qualify. Before you assume these programs are available only to homes located “in the boonies,” consider this – the eligibility maps are 17 years old. In many areas, was characterized as “rural” in 2000 could be part of suburbia today. The Columbia SC mortgage forecast will continue to be impacted by USDA loans.
The Housing Market Remains Safe
Mention the increased availability of mortgage credit and some people immediately equate that with concern for another housing market crash. In their minds, the logic is easy mortgage availability was responsible for the housing crisis back in 2008 and 2009 – so, if credit becomes easy to obtain we are likely to repeat history. However, here’s something that may calm your fears. Remember the Mortgage Banker’s Association (MBA) MCAI index report discussed earlier? The MBA estimates it reached close to 900 during the bubble in late 2006. Again, the index today is just 177.1. Industry experts say the Columbia SC mortgage forecast is for credit availability to remain strong – and safe – because the housing market is a different animal than it was over a decade ago. Lenders are less likely to be as lax as they were in the years leading up to the housing crisis.
Lastly, mortgage lenders today are more cognizant that making good, sound mortgage loans is the foundation of the housing industry. There are more safeguards in place to prevent history from repeating itself than ever before – primarily as a result of the housing crash. Borrowers today need to have good credit – not excellent, blemish-free credit reports – but a history of paying their monthly obligations on time, over time. In addition, they need sufficient income to qualify for the monthly payments. Of course, they need to have a sufficient down payment to qualify for most mortgage loans, though not all.
Simply put, we remain optimistic with the Columbia SC mortgage forecast for 2017 and beyond. Here’s hoping the housing market will continue to recover to its full capacity.
You can find more articles pertaining to the Columbia SC mortgage forecast in the "Columbia SC Mortgage Info" section of articles just below Columbia SC Real Estate Categories in the column to your right. Remember to also check us out by finding us on Facebook and following us on Twitter.
Columbia SC mortgage rates continue to be in the news. With the recent rise in interest rates by the Federal Reserve, and the likelihood of additional increases on the horizon, the obvious question remains, “Is it still a good time to purchase a home?”
Let’s look at what’s transpired in recent months since the presidential election in November. The average interest rate for a 30-year fixed-rate mortgage increased from 3.68% to 4.2%, based on Freddie Mac's mortgage rate survey report. However, despite the increase, even a 4% rate is very low compared to historical averages. To put that into perspective, for roughly 30 years from 1971 to 2001 mortgage interest rates were above 7% most of the time. In October 1981, they peaked at 18.16%. It wasn’t until 2008, just over eight short years ago, that interest rates began to drop consistently below 6%.
While Columbia SC mortgage rates are expected to continue to rise slightly this year, most agree that aggregate increases will be less than 1% – meaning rates should remain below the 5% level. With that in mind, relatively speaking, mortgages will still be affordable for most home purchasers. And, as mentioned above, compared to where interest rates were just a decade ago, a 4% to 5% interest rate will seem like a bargain!
Since 2009, the Federal Reserve has purchased significant amounts of mortgage-backed securities. The recent strength of the stock market – as a result of the presidential election results – has meant those purchases have temporarily been suspended. In addition, the Fed has indicated they may raise the federal funds rate at different intervals this year. The fed funds rate is the rate at which banks loan money to each other. However, there is a loose relationship between the fed funds rate and the longer-term mortgage interest rates.
A small increase in the Fed’s actions may translate to a slight increase in mortgage rates and their monthly payments. As an example, on a $200,000 30-year fixed-rate mortgage at 4% the payment would be roughly $955 per month. At 4.5% the payment would be approximately $1,013. A 5% mortgage rate would equate to payments of roughly $1,074 per month.
As you can see, the impact of slightly higher rates isn’t really a significantly higher monthly payment. It likely would only impact those homebuyers who were watching their budgets carefully, or those that would be on the borderline of loan qualification.
A greater concern than Columbia SC mortgage rates seems to be the rising home prices continuing to occur throughout the U.S. The median sales price of a home in 2016 rose 5.5% from the previous year. Experts expect a 5.3% increase this year. And therein lies the real issue. The “double-whammy” of higher interest rates combined with higher sales prices may be the deterrent to may home buyers – especially first-timers.
Let’s take a look at six factors that may have more impact than interest rates on your monthly mortgage payment.
Your Credit Score
Higher credit scores translate to lower interest rates for applicants with good credit. A score of at least 740 will likely get the best rate from most mortgage lenders.
Your Down Payment
A popular misconception is that you have to have a down payment of at least 20% in order to buy a home. However, if you do have 20% to put down you can avoid having to pay private mortgage insurance (PMI), a type of insurance that protects the lender against the borrower defaulting on their mortgage payments. According to Freddie Mac, the PMI premium can run anywhere from $30-$70 per $100,000 of your mortgage amount. Naturally, with a larger down payment, the monthly payment amount is less since you’re financing a lower loan amount. That's always true, regardless of what Columbia SC mortgage rates do or don't do in the future.
Points
"Points" are actually percentage points of the loan amount – 1 point equals 1% of the loan amount – so, if you’re borrowing, say, $200,000, a point would be $2,000. You can pay points to lower your interest rate. Since points are prepaid, be sure you “do the math” and determine whether buying down the interest rate is the best financial decision for you at the time – and to make sure it’s saving you interest in the long run.
The Term of the Loan
While a 30-year fixed-rate mortgage loan is the most popular selection, if you can afford the increased payment it may be worth looking at a shorter term. A 15-year term will not only be issued at a lower interest rate, but you’ll save more than 50% in total interest repayments over the life of the loan. Even borrowers who opt for a 20-year or 25-year term are pleasantly surprised at the interest savings they can enjoy by paying slightly more money each month. Ask your mortgage lender for an amortization schedule with different terms for comparison and see which term fits your financial capabilities best.
Closing Costs
Closing costs and fees vary from one lender to the next. It’s worth shopping around to find the best deal on closing costs. In addition, some fees are negotiable, so ask questions and make the best deal you can. Lastly, remember who pays the closing costs is strictly between you and the seller of your home. So, be prepared to negotiate with the seller for him to pay part – or all – of the closing costs as part of the contract.
Home Sales Price
Naturally, a higher price tag for a more expensive home translates to higher monthly mortgage payments. Make sure you are looking for homes in your affordable price range. What’s the joy in buying a home if you have to struggle to make the monthly payments – even if you qualify for a higher amount? Consider selecting and buying a less expensive home, even if you have to do without certain features or extras. You’ll sleep better at night.
You can find more articles pertaining to the Columbia SC mortgage rates in the "Columbia SC Mortgage Info" section of articles just below Columbia SC Real Estate Categories in the column to your right.
Remember to also check us out by finding us on Facebook and following us on Twitter.
The Columbia SC mortgage outlook is expected to include higher interest rates for 2017. The Federal Reserve’s recent short-term interest rate hike was both highly anticipated and expectedly minimal. And, while the fed funds interest rate has little direct correlation to longer-term mortgage interest rates, there has been – and may continue to be – a slight upward movement in rates for home loans.
Even prior to the Federal Reserve’s action, the average interest rate for conventional 30-year fixed rate mortgages increased after the recent presidential election. The rate hike saw record-low mortgage rates increase on average from a half to three-quarters of a percent. Post-election stock market activity meant investors were bullish on stocks and less interested in the bond market. Since long-term mortgage rates are more closely tied to the 10-year yield of U.S. Treasury bonds, rates rose as bond market investments declined.
A burning question exists, however, as to whether the Columbia SC mortgage outlook of rising rates will really make much difference to the housing market in 2017. The reason for the question is simple: Increasing rates, as exhibited by the Federal Reserve, are indicators of a stronger national economy – and a stronger economy historically favors the housing industry.
In addition, as one economist with Fannie Mae pointed out, “If interest rates are rising because the economy is growing more rapidly, then typically, incomes also rise, and the rising incomes offset the increase in the size of the mortgage payment…”
The unknown factor, however, tends to be largely intangible – buying a home is one of the most emotional purchases an American consumer will likely make. In a recent survey published by real estate brokerage firm Berkshire Hathaway HomeServices, 76% of existing homeowners and 79% of potential homeowners mentioned higher interest rates as a major challenge for the existing housing market. Even more significant is that each of those statistics reflect increases of 16% and 8%, respectively, from the same period of time in 2015.
The report also revealed the anxiety of a larger number of owners and prospective buyers would increase if the Columbia SC mortgage outlook were to include further rate increases. The lesson here is that when it comes to housing, perception is reality. Case in point: Interest rates are still within 1% of all-time historic lows, but to many potential buyers – especially first-timers – it may not seem that way, in light of the recent attention rate increases have received.
Still, in the face of recent increases there are real estate experts who feel rates won’t climb much higher in 2017. Redfin, for example, predicts rates will likely reach no higher than 4.3% for a 30-year fixed rate mortgage. In addition, they expect an ever-improving credit market, citing large financial institutions like Bank of America, Wells Fargo, JP Morgan and Quicken, who in 2016 offered mortgage loans with just 1% – 3% down. Redfin says these and other programs will attract more millennials and first-time buyers into the U.S. housing market in 2017.
In addition, to further highlight the intangible impact the Columbia SC mortgage outlook may have on the home buying public, Zillow offers this recent finding. In a survey of consumer housing trends, Zillow says home purchases were more closely tied to a consumer’s overall financial health than to any interest rate changes. They found certain life events – like employment changes, promotions, job-loss, or a change in the household make-up were more impactful factors affecting a home purchase. As a result, Zillow says, while there is naturally concern over the part of prospective homebuyers about rising interest rates, they are quick to realize that by historical standards the cost of borrowing money today for a home mortgage is very low. Lastly, while rate increases may have an impact on where they buy or the size home they buy, most purchasers are committed to entering the housing market once they elect to do so.
Of concern to many experts is the affordability factor that appears to be weakening – especially among first-time home buyers. Year over year – from 2015 to 2016 – the number of available homes for the average first-time buyer dropped over 12% according to Trulia. Other Trulia findings show that while premium or higher-end homes comprise roughly 50% of available listings nationwide, starter homes – attractive to first-timers – make up only 25% of listings. In addition, first-time buyers are expected to spend roughly 39% of their monthly income to afford a home, compared to 37% in 2015.
Finally, as we analyze the Columbia SC mortgage outlook for 2017, one continuing concern lingers in the housing market – available inventory. Experts say the biggest obstacle facing a strong spring housing market won’t be higher interest rates, but a lack of home supply. Real estate listings throughout the U.S. fell in 2016 compared to 2015 with little sign of improving enough during 2017 to impact the spring. Sales increases, quite simply, are dependent on housing supply – and one can’t occur without the other. While the new-home market is on the rise, homebuilders have still been unable to keep up with the demand for new housing, and housing starts have been lower than usual. In addition, homeowners who would normally be selling their homes to move into larger, better or more expensive homes aren’t moving as they once did. Experts say a typical homeowner stays in their existing home twice as long as they did just 15 short years ago. Increased interest rates will likely continue this trend as consumers won't sell their homes unless they have another home to buy – and probably will be less likely to pay more for the financing than they currently pay for their lower-rate mortgages.
In summary, the Columbia SC mortgage outlook seems to be less about rising rates and move about other factors – some that are intangible like financial well-being – and others that are more practical like home inventory and new- and existing-home supply from which to choose.
You can find more articles pertaining to the Columbia SC mortgage outlook in the "Columbia SC Mortgage Info" section of articles just below Columbia SC Real Estate Categories in the column to your right.
Remember to also check us out by finding us on Facebook and following us on Twitter.
The Columbia SC housing and economic outlook for 2017 seems to be filled with nagging questions about how gradually increasing interest rates may affect the continued improvement of the housing market. While interest rates have edged slightly upward in the last several weeks – most notably in response to the stock market's post-election gain – home mortgage rates are still comparatively low. But for how much longer? An extended period of rising rates may paralyze homeowners with low rate mortgages who would otherwise potentially be in the market to buy bigger or newer homes. Economists call such market conditions "rate lock," which could take a toll on housing demand during 2017.
The past Columbia SC housing outlook has enjoyed a seven-year run of near record low mortgage interest rates. That has encouraged homebuying and has increased home values dramatically since the housing crash of nearly a decade ago. Yet, the aforementioned increase in mortgage rates since the election has real estate professionals and prospective homebuyers a little on edge. Higher interest rates, of course, translate to higher monthly mortgage payments. That can cause existing homeowners to stay in their homes a little longer rather than trading up. As one real estate professional put it, "It doesn't take much to turn off the faucet in this market because inventory is so low and prices have gone up so quickly." The most recent mortgage interest rate increase boosted the monthly cost of owning a typical home in United States by slightly more than $70 per month. That equates to roughly $26,000 over the term of a 30-year fixed rate mortgage loan. While $70 per month is not a substantial amount, it probably has already had an impact on marginal borrowers concerned about additional expenses. Experts fear another half-point rate increase could impact even the more qualified borrowers.
In addition to the affordability aspect and the psychological impact that a higher monthly payment may have on a family purchasing a home, mortgage qualification may also become an issue. The Columbia SC housing market has already seen some households who spend 35% or more of its income on mortgage payments. Most experts recommend that debt-to-income ratios fall between the 30% to 33% range. As interest rates rise, the debt-to-income ratio will be strained causing some lenders to reconsider whether a borrower may qualify or not.
According to CoreLogic, Inc., roughly 66% of homeowners in the United States who have mortgages enjoy rates less than 4.5%. Economists say rates would probably need to increase above 5% before homeowners face the "rate lock" dilemma mentioned earlier. And that's where the concern begins to form. Because of the strengthening U.S. economy, the Federal Reserve will likely increase short-term interest rates this month. While the rates on Fed funds have no direct correlation to mortgage interest rates, an increase by the Federal Reserve would likely send a message that interest rates in general will likely rise – even if only slightly. Home mortgage interest rates are more closely tied to the yields on U.S. Treasury bonds. Those yields usually rise during inflationary periods, and while economists predict mortgage rates will increase in 2017, nobody really owns the proverbial "crystal ball."
Interest rates have risen largely due to the improved economy. In addition, investors are gambling that increased government infrastructure spending along with resultant tax cuts will continue to accelerate growth. The underlying hope is that the additional growth will spur increased wage growth, and higher wages should offset the increases in higher mortgage payments. However, one economist warns that since so many American homeowners have low rates on their mortgages, it could result in an ironic disincentive by encouraging homeowners to pursue employment in other cities if it means their mortgage payments will be higher.
So, what does all this mean for the Columbia SC housing outlook moving forward? If history is any indication, rising interest rates can impact the economy quickly and dramatically. Mortgage interest rates in 2013 increased almost a full percentage point to 4.5% on the heels of investor predictions the Federal Reserve would decrease its bond buying program. The result was a decline of 8% on the sales of previously owned homes over the next six months. In addition, sales price increases dropped from an average of 9% to roughly 5%. Therefore, if 2013 is any indication the market could potentially experience a cooldown in home prices.
Of course, it remains to be seen what affect increased interest rates – if they do occur – will have on the Columbia SC housing market and the resulting economic outlook. However, one thing to remember is that even interest rates in the 5% range still are relatively low when compared to other times in American history. Naturally, home prices continue to rise, meaning mortgage loan amounts are higher than ever before. However, going forward there is light at the end of the tunnel when it comes to home affordability. History has proven more times than not that even in the face of housing challenges home affordability is a luxury still readily available to most Americans. Whether it's more affordable mortgage products with more favorable terms and conditions or more affordable housing units entering the market, the bottom line is that housing is too big a piece of the U.S. and world economy to be adversely affected for long.
We've weathered such storms before and with the exception of the housing crash of a decade ago, the industry has rebounded steadily and has learned from its mistakes. Time will tell if the slight interest rate increases will lead to a slowdown of the housing recovery, or if it will provide the impetus for creative lending, improved mortgage products, more affordable housing and sufficient motivation for first-time homebuyers to buy. While the challenges can be daunting, the industry remains hopeful that only slight interest rate increases will occur, resulting in minor fallout that can be absorbed by the market through greater home inventory and a continued steady demand.
You can find more articles pertaining to the Columbia SC housing outlook in the "Columbia SC Economy" section of articles just below Columbia SC Real Estate Categories in the column to your right.
Remember to also check us out by finding us on Facebook and following us on Twitter.