Mortgage Rates Are Back On The Rise
Mortgage rates have hit their highest rate in a year. Foreclosures seem to
have bottomed out, so the available houses has decreased. If you’re concerned
that your chance in a generation to buy a house has ended, take a deep breath
and think again.
Home Prices Still In Reach
In most metropolitan areas, there are still some houses that are in the what could be affordable range. The key is working with a reputable mortgage loan officer to get pre-approval and determine what is affordable for you.The Washington Post reports that the rise in interest rates is tied to an improved economy. Home prices will increase at approximately the same rate.
It also shows an initial reason for some optimism. At a 30-year fixed-rate mortgage rate of about 3.8 percent, the typical American homebuyer can afford a $279,000 house. That’s 45 percent more than the current price of houses. That suggests that affordability isn’t the thing holding Americans back from buying houses (instead, it may be such factors as tight credit standards, difficulty building up a down payment or lack of confidence in future job prospects). It also implies that slight increases in the mortgage rate shouldn’t completely undermine the improvement in the housing market; the thing to watch is not rates per se, but what happens on those other factors that are drags on would-be homeowners.Yahoo! Finance agrees stating that we are in a once-in-a-generation opportunity for home buyers. They also report that current home prices are approximately 27% below market value.
Forbes is reporting that the increased interest rates could stall the economy. However, they also wonder if the increase in rates would loosen some of the tight restrictions that mortgage lenders are requiring.The housing affordability index, which includes interest rates as well as income and prices in its calculation, remains just shy of its all-time record high. But what about interest rates—are they not artificially low and therefore the primary reason why affordability is so high?We think the short answer to this question is “No”.
While rates are being depressed by QE, home prices are still about 27% below their previous peak according to C-S. Over this same period, personal income is up sharply. In fact, if mortgage rates went up 100 basis points from their current level, all else being equal, affordability would still remain higher than it has been in every year prior to 2010. Secondly, all else is probably not equal because a 100 basis point rise in mortgage rates would likely be associated with a meaningful economic improvement, including a step-up in income growth (i.e., faster job gains).
The first thing rising rates affect is refinance applications. Refi apps have fallen for the past several weeks, logging a 15% drop (after accounting for Memorial Day) last week from the week before, according to the Mortgage Bankers Association. Mortgage applications have begun to tick down too, falling 11.5% from the week earlier. Yet if rates continue to rise, it might spur qualified home buyers sitting on the fence to make purchases before financing becomes any more expensive, facilitating a short term uptick in home sales.So don’t give up your dream of owning a home. Work with a qualified mortgage loan officer to get pre-approved and understand how much you could qualify for. Then when a good house in the right neighborhood comes on the market, you’ll have a much stronger position for your bid.
Rising rates could create a long term benefit for the market as well: slightly looser lending standards. Real estate experts have lamented how exceedingly tight credit has been — even for buyers who on paper qualify for mortgages. Lenders have been overly cautious about underwriting new mortgages in large part because the returns associated with low rates haven’t necessarily matched the level of risk.
“Now that prices are rising, there is far less default risk for people taking out mortgages so if the credit standard is dialed back down toward normal from stringent, I think we could easily negate the impact of rising rates,” says Yun.
Best Gifts for Grads
Most grads love cold, hard cash because no matter what, they’re going into a
new world soon. Some will get jobs, some will be looking for jobs, and some will
be starting a new school.
Some people enjoy giving an actual present, and for them, we offer our well researched suggestions.
High School Grad
Shady Peeps allows you to specifically choose your college’s colors.A good, but not too expensive, bicycle for getting around campus and town. They’re easier to store than a car, and a lot cheaper since you don’t have to pay for the parking permit.
Look for items geared towards dorm rooms like lap desks, special bed pillows for sitting up, small appliances for cooking simple things, and cookbooks for dorm room cooking.
Find out if there are any chain restaurants near their college, and get them gift cards so they can sneak out for a good meal on occasion.
If you’re on a budget, give them a handmade coupon book that they can mail in exchange for cookies or a general care package (don’t forget a book of stamps!)
College Grad
A well made messenger bag or satchel will be a great present for the grad going off to the workplace where backpacks and knapsacks may not be up to dress code.Find out where your new grad will be working (fingers crossed they found a good job). A present of a high end bicycle might be very welcomed for a commute vehicle. (Did you know some new bikes glow in the dark?). If the grad already had a commute bicycle, look into purchasing a high end helmet to protect all that new knowledge.
Great for Both
Real Simple magazine annually puts together a list of unique gifts. Here is 29 Unique Graduation Gifts for 2013. Most of them could go for either grad. The high end tonic water is definitely College Grad Only.Country Living put together a list of inexpensive and elegant gifts for graduates.
New laptops are a great gift. Because of the back to school sales, you can get a pretty powerful laptop for a reduced price.
No matter what, always include a gift receipt in case there’s a problem with the item and it needs to be exchanged or returned.
What was your favorite graduation gift?
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