In a move that surprised the financial markets, the Federal Reserve has said it is not yet ready to wind down its massive monetary stimulus, and that is believed to be positive news for Columbia SC mortgage rates.
The surprise announcement from the Fed means it might not begin to wind down its bond buying until after Ben Bernanke's term as Fed chairman expires next January.
As always, we will keep you informed on any news coming from the Federal Reserve as it may or may not affect Columbia SC mortgage rates, as well as the Columbia SC housing recovery.
For more news and articles pertaining to Columbia SC real estate news, click on the Columbia SC Real Estate News link to your right under the Columbia SC Real Estate Categories listings.
By now, unless you've been living in a closet for the past few weeks, you already know that mortgage rates have been inching up.
If history is any indication, the recent spike in mortgage rates is going to have little to no impact on home prices, according to a new report from Fannie Mae.
Whether you're planning to buy or sell a Columbia SC home, here's what you need to know about rising mortgage rates.
Mortgage Rates Are Still Pretty Cheap
If the economy continues to improve as anticipated, mortgage rates will keep inching up. We're not expecting to see rates climb back above 5 or 6 percent again until at least 2014, but with mortgage rates, a lot of things factor in to set the rates. But even at 5 percent, historically speaking, rates are still pretty cheap. Anyone remember the days of 21 percent mortgages?
Higher Mortgage Rates Won't Cripple Housing
Mortgage rates would have to rise fairly sharply to make a dent in the Columbia SC housing market. With prices rising, sellers can be patient. For buyers, as we said, mortgages are still historically cheap.
Mark Zandi, chief economist for Moody's Analytics, examined more than 20 years of mortgage rates and home price data and found that, on average, for every percentage point increase in mortgage rates, the pace at which home prices grew was lowered by half a percentage point.
Be Ready To Lock In Your Rate
To avoid any short-term spikes, it is recommended that you lock in as soon as you can (typically when you sign a contract to buy a Columbia SC home).
Most lenders won't charge for a 45-or 60-day rate lock. Pay for a 90- or 120-day lock only if you think your deal may take a while to close. The typical cost is a quarter of a point per 30 days. With a float-down option, you'll pay less when rates fall at least a quarter point. Skip that add-on unless it's free.
Fixed Mortgage Rates Usually Beat Adjustables
You may be eyeing adjustables, which are up less than fixed rate loans. An ARM is the better call only if you plan to own your Columbia SC home for a short time.
When you need five or less years, you might save with an adjustable rate. A monthly payment on a $200,000 mortgage is $954.00 (principal and interest only) with a 30-year loan at 4%. On a 5-year ARM at 2.6 percent, you're looking at $800 and some change. But it's crucial to get a loan that matches your time frame.
When we sit down and discuss your Columbia SC home buying options, we'll go over mortgage rates with you and help you decide which type of loan is right for your particular situation. We can also help you find a mortgage expert in the Columbia SC area to discuss your options with as well.
Mortgage rates are on the rise, and home buyers are trying to get in before they go higher. In the Columbia SC area, rising mortgage rates and low inventory are combining to drive up prices and turn things into a seller's market. CBS's Anthony Mason reports…
Potential Columbia SC home buyers need to be vigilant in their home search, but also need to remember not to fall in love with any home before you own it, or you just might end up paying more for the home than it's worth.
Using an Exclusive Buyer's Broker is the only way you can be sure of getting the best possible deal on any Columbia SC area real estate.
The days of record low Columbia SC mortgage rates have apparently come to an end as fixed-mortgage rates hover around 4%. And while there are many saying that rising rates won't hurt the housing market, others are more concerned.
Many analysts seem to agree that if Columbia SC mortgage rates rise much more above where they are now, affordability could begin to take a toll. This is especially true with first time home buyers and investors, which combined, make up a large part of the home buying market these days.
Speed of Rising Columbia SC Mortgage Rates the Biggest Concern
Fannie Mae Chief Economist Doug Duncan said the concern should be less about what the rates have risen to and more about the speed at which they are rising.
Duncan noted that in 1994, for instance, rates rose 2% over a 12-month period, resulting in a huge impact on home prices, which fell significantly.
"If the rise happens rapidly, it tends to have an impact," said Duncan, who added that once Columbia SC mortgage rates rise 100 basis points, home sales may begin to slow.
As far as first-time homebuyers go, Duncan said it all depends on how high the mortgage costs go. "It's all about the size of the mortgage that they're going to try to take on relative to their financial strength," said Duncan.
Overall, first-time homebuyers are making up about 30% of total buyers, said Duncan.
High investor activity is making up the difference, he added. "If investors fell off, would first-time buyers be bigger?" asked Duncan.
A lot lies on that very important "if," according to Duncan. If investors start to back out, you'll likely see prices flatten out.
"We do believe there is going to be a slow down," said Duncan.
But Duncan added, "We're not up to the average long run mortgage rate that the economy has seen over all those years." From World War II to today, the average 30-year fixed-rate mortgage is about 6.5%, according to Duncan, who noted, "People have forgotten that there were mortgage rates at the 14% and 15% range for awhile."
Even though Columbia SC mortgage rates have risen pretty quickly and significantly, they were from a very low level — the lowest level since World War II — so we're not even close to the average 30-year fixed-rate mortgage rate. The greater concern overall is not the level of the Columbia SC mortgage rates, but the speed at which they rise.
Columbia SC housing is facing what some financial experts call "very concerning circumstances" when it comes to rising mortgage rates.
Peter Tchir of TF Market Advisors, a New York research, asset management, and consulting firm, puts it quite simply, "Rising rates are bad, particularly bad when it comes to one of the bright spots for the U.S. economy: housing."
How Rising Rates Affect Columbia SC Housing
Recent increases in mortgage rates adds roughly $90 to $100 onto the monthly mortgage payment for the typical $250,000 house. Rates for a 30-year fixed mortgage tend to track the 10-year Treasury rate very closely. Yields on the 10-year Treasury note hit their highest level in more than a year recently.
Although rates remain very low based on historical standards, Tchir thinks this is significant headwind for potential buyers who have been on the fence. And he counts a lot of people in that category given the lack of growth in high paying jobs during the economic recovery. Tchir points out much of the job growth post-recession has come from lower paying, service-oriented industries or in temporary services.
As for housing, mortgage applications (particularly for refinancing) have dropped in recent weeks. Tchir thinks we could see a real slowdown exacerbated if and when the Federal Reserve begins to taper its bond-buying program, which would remove support for Columbia SC housing.
Rates are likely to keep rising, but how far must rates rise before buying a home starts to look expensive relative to renting? At today's prices and rents, buying would be cheaper than renting until the 30-year fixed rate reaches 10.5%. At current 30-year fixed rates according to Freddie Mac, buying is 41% cheaper than renting nationally. With a 5% mortgage rate, buying is still 34% cheaper than renting nationally.
So even though rates for buying Columbia SC housing is on the rise, it's still a lot cheaper than renting. Contact us today for current rates and available inventory of homes for sale.