Mortgage Interest Rate Increase = Slow in Housing Appreciation

The housing market is coming back nicely. As sellers, we need to not be over exuberant when it comes to pricing. There is little doubt that house prices have appreciated over the last twelve months in most regions of the country. However, with both the inventory of homes for sale AND interest rates increasing, we have to be careful to not over judge what the market can bare.

 The rate of price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and the first-time buyers expected to take their place may be working within a pre-set budget.

 Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).

This decrease in buyers’ purchasing power will have an impact on home values going forward. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.

Who's Responsible for Phoenix's Real Estate Miraculous Recovery ?

The latest article from Money Magazine explains who is responsible for the miraculous rebound in the Phoenix Housing Market. In Phoenix, we went from a glut of homes on the market to a seller's market in less than a year. Phoenicians did not rely on the government or Wall Street conglomerates to bail them out. We relied on "Mom and Pop" investors.

I would also like to add that savvy real estate agents and loan officers in the Phoenix area also helped us quickly move through a flooded market. By reaching out to investors in other states and in other countries, real estate agents showed buyers our tremendous potential and attracted them to invest in AZ.

We must also acknowledge that there are agents in the Phoenix area that lead the nation as Short Sale "pioneers". As short sale advisors to the major lenders, these agents helped the major banks revamp and refine the short sale process so that it became more efficient. They helped pave the way for the more efficient short sales process that is now available to the rest of the nation.

So kudos to the Phoenix area for pulling together and getting us out of crisis mode quickly. Between the realtors, investors and loan officers, we definitely have some of the best and brightest in the nation!

5 REASONS TO PLACE YOUR HOME ON THE MARKET NOW

1.) Demand Is High
Homes are selling at the fastest pace since November 2009 when the market spiked in response to the home buyer tax credit. The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed that monthly sales increased 9.7% over the same month last year. Total sales have been above year-ago levels for 22 consecutive months. There are buyers out there right now (buyer traffic is 31 percent stronger than a year ago) and they are serious about purchasing.

2.) Supply Is Beginning to Increase

Total housing inventory last month rose 11.9% to 2.16 million homes for sale. This represents a 5.2-month supply at the current sales pace, compared with 4.3 months in January. Many expect inventory to continue to rise as more sellers escape the shackles of negative equity. Selling now while demand is high and before supply increases may garner you your best price.

3.) New Construction Is Coming Back

Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative for many purchasers.

4.) Interest Rates Are Rising

According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year mortgage have shot up to 3.98% which represents a jump of more than ½ point since the beginning of the year. Even those trying to be the voice of reason on this issue are projecting higher rates. For example, Polyana da Costa, senior mortgage analyst at Bankrate.com said:

“Rates are unlikely to keep going up so quickly and should remain below 5%.”

Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

5.) It’s Time to Move On with Your Life

Look at the reason you are thinking about selling and decide whether it is worth waiting. Is the possibility of a few extra dollars more important than being with family; more important than your health; more important than having the freedom to go on with your life the way you think you should?

You already know the answers to the questions we just asked. You have the power to take back control of your situation by putting the house on the market today. The time may have come for you and your family to move on and start living the life you desire.

Another Housing Bubble On the Horizon???

Three Reasons there will NOT be another housing bubble:

1) Supply is being to increase nationally. A lack of inventory in AZ has created a market of multiple bids which caused our prices to rise. However, nationally the supply inventory has increased dramatically since January.

2) Demand will decrease in certain areas. Investors have been a large part of the AZ Real Estate scene over the last 2 years. As prices continue to rise, some of these investors will back off and investor sales will slow.

3) As mortgage rates increase, buyers will be able to afford less. The Mortgage Bankers Association, Fannie Mae and NAR have all projected an increase in mortgage rates over the next year. Buying power will decrease as borrowers can no longer afford the same price point and as monthly payments increase.

In summary, the time to Buy is NOW! Prices and mortgage rates are on the rise. Had a short sale or foreclosure recently and want to purchase? Give us a call and we will have a loan officer place you on a plan to home ownership.

Can A Leprechaun Buy a House in AZ???? (Courtesy of Diane Gerdes of the Mortgage Advantage)

Maybe. The Equal Credit Opportunity Act of 1974 prohibits discrimination in granting credit to individuals based on race, color, age, religion or national origin. Stature, mode of dress and jig dancing is not a reason to deny a home loan.

The guidelines state our small cloverleaf carrying friend establish residency with a lender-approved work visa. The types of documentation have changed so be sure to check with the bank or lender and follow their guidelines. Student and other limited visitation visas are not considered adequate documentation for mortgage financing. A green card (not just for the Irish) or permanent residence extends all of the same benefits as a U.S. Citizen when financing homes.

The Leprechaun must also build a credit history that spans two years with three credit lines. A good credit score is important in order to receive a competitive interest rate.

Unfortunately having a pot of gold does not qualify for down payment or closing costs, unless it has been put in a bank and seasoned for over 60 days. "At the end of the rainbow" is not an appropriate paper trail.

Work history is important. If Leprechauns follow the tradition of conducting mischief for profit, they will need a two year income history disclosed on American tax returns.

It's not easy being green or in real estate. That's why we have Guinness.

AZ Real Estate Update: SEE HOW YOUR CITY'S HOME PRICE INCREASED...

AZ Real Estate Update: SEE HOW YOUR CITY'S HOME PRICE INCREASED...: The Greater Phoenix Housing Report has been filed by Michael Orr, the Director of the Center for Real Estate Theory and Practice at ASU. ...

SEE HOW YOUR CITY'S HOME PRICE INCREASED...

The Greater Phoenix Housing Report has been filed by Michael Orr, the Director of the Center for Real Estate Theory and Practice at ASU. It is showing that the SIGNIFICANT ANNUAL PRICE INCREASE OVER THE LAST 12 MONTHS (Dec 2011 vs Dec 2012) has spread to the majority of the Phoenix area. Below is a summary of the monthly average price per square foot increase over the last 12 months.

How does your city compare???

 City %Change in Price/ Sq Ft

Tolleson 41%
Phoenix 39%
Glendale 38%
Avondale 34%
El Mirage 33%
Buckeye 29%
Peoria 28%
Goodyear 26%
Surprise 24%
Litchfield Park 23%
Sun City West 15%
Sun City 11%

 Only Paradise Valley saw a decrease in pricing. Paradise Valley's average price per square foot was down 16% over the past 12 months. Traditionally Paradise Valley has the highest pricing in the valley.

 Want to know how much your home is worth? Contact Mary Drefs at 623-694-0354.