It is going to happen...interest rates will rise as the economy and real
estate markets improve. Based on what the Federal Reserve tells us,
that scenario may be set in motion soon.
The Fed isn't expected
to raise base interest rates when they meet this week, but it's expected
that they will send signals of what is to come. They said that they
would consider raising rates when unemployment goes below 6.5% and
inflation is hovering around 2.0%, but the Fed will look
at many more issues before deciding to raise rates.
Interest
rates have been staying around 4.3%-4.5% for 30 year home purchase
financing over the past several months, which is about 1% higher than a
year ago. Rates are expected to climb to between 5 and 5.5% by the end
of 2014.
Of course, rising interest rates will have an effect on
purchasing power. A home buyer will be able to finance a higher sales
price now versus what they can qualify for as rates increase. At 4.5%
for 30 years, the principle and interest payment is $1,013.37 on a
$200,000 mortgage loan.
See below for principle and interest calculations at rising interest rates:
$200,000 at 4.50% = $1,013.37
$200,000 at 4.75% = $1,043.29
$200,000 at 5.00% = $1,073.64
$200,000 at 5.25% = $1,104.41
$200,000 at 5.50% = $1,135.48
CLICK HERE to perform mortgage calculations for your price range
As
you can see, going from 4.5% to 5.5% causes an 11% increase in monthly
payment. Assuming a $200,000 mortgage is a buyer's maximum approval at
4.5%, a 5.5% interest rate will reduce a buyer's spending power to
$178,475. Couple that with rising home prices
(6.1% increase overall last year) in many locations, one can see the
significance. This will affect home buyers, as well as home sellers.
Rate
increases are expected to be gradual throughout the year, but they are
expected to rise. Rates are still at or near historical lows we had not
experienced priot to the past several years. Before that, 6-7% rates
were considered great. The point here is to provide some persective on
how rates will affect home purchases in the future.
Tuesday, April 29, 2014
Thursday, April 24, 2014
Cleveland, Northeast OH Area Real Estate Market March 2014
According to the Northeast Ohio Regional Multiple Listing Service (NORMLS) and an article from the Cleveland Plain Dealer newspaper,
homes sales in the region decreased from February to March. Lower home inventory, higher rental prices and higher buyer
demand due to low
(but climbing) interest rates, have been driving this increase in activity and increase in
sales prices over the past year or so.
Sales and price gains actually dipped a bit recently, however, which is
being attributed to the harsh winter weather experienced in the area.
Sales from February to March do show an increase, however, sales from March 2013 to March 2014 show a decline. Among the 15 counties in Northeast Ohio, single family home sales are down 5.9% and condominium sales are down 15.5%. Year-to-date, local sales of new and existing homes were lagging by nearly 1.7%. Single family home prices were up 1.8%, compared to last year. Condos were up 7.7% higher than March 2013.
Ohio's sales volume showed a decline by 6.6% from March 2013, while the US market is experienced a sales volume decrease of 7.5%. Ohio's sales prices have increased by 3.3% from last March and national figures have shown a 7.9% gain. Ohio and Northeast Ohio's price increases have slowed or stabilized recently, while the US sales prices continue to rise at a higher rate, which has been historically the case in our area compared with the nation.
The key point here is that the market is starting to stabilize and shifting to a seller's market. Sellers are getting more for their homes than last year, with buyers paying a bit more to purchase a home to take advantage of the low interest rates. Buyers should note that interest rates have increased slightly, hovering around 4.5%.
This is a great time for buyers who also have a home to sell, because rates are still relatively low on the buying side, but home values have risen in many areas to improve the financial return on the selling side. If the economy continues to improve, buyers in the current market will be able to realize value gains for the homes they purchase as well.
Sales from February to March do show an increase, however, sales from March 2013 to March 2014 show a decline. Among the 15 counties in Northeast Ohio, single family home sales are down 5.9% and condominium sales are down 15.5%. Year-to-date, local sales of new and existing homes were lagging by nearly 1.7%. Single family home prices were up 1.8%, compared to last year. Condos were up 7.7% higher than March 2013.
Ohio's sales volume showed a decline by 6.6% from March 2013, while the US market is experienced a sales volume decrease of 7.5%. Ohio's sales prices have increased by 3.3% from last March and national figures have shown a 7.9% gain. Ohio and Northeast Ohio's price increases have slowed or stabilized recently, while the US sales prices continue to rise at a higher rate, which has been historically the case in our area compared with the nation.
The key point here is that the market is starting to stabilize and shifting to a seller's market. Sellers are getting more for their homes than last year, with buyers paying a bit more to purchase a home to take advantage of the low interest rates. Buyers should note that interest rates have increased slightly, hovering around 4.5%.
This is a great time for buyers who also have a home to sell, because rates are still relatively low on the buying side, but home values have risen in many areas to improve the financial return on the selling side. If the economy continues to improve, buyers in the current market will be able to realize value gains for the homes they purchase as well.
Tuesday, April 1, 2014
Cleveland, Northeast OH Area Real Estate Market February 2014
According to the Northeast Ohio Regional Multiple Listing Service (NORMLS) and an article from the Cleveland Plain Dealer newspaper,
homes sales in the region increased from January to February. Lower home inventory, higher rental prices and higher buyer
demand due to low
(but climbing) interest rates, have been driving this increase in activity and increase in
sales prices over the past year or so. Prices actually dipped a bit recently, however.
Low inventories continue to prevent some would-be buyers from making deals. Fewer homeowners put their properties on the market in February, when compared with listing-service figures from January. Overall, new listings are down 8.3% this year.
Sales comparing February 2013 to February 2014 still show increasing sales figures. Among the 15 counties in Northeast Ohio, single family home sales are up 3.6% but a slight decline in condominium sales. and is showing a 5.7% price decrease from last February,
Ohio's sales volume showed a decline by 4.3% from February 2013, while the US market is experienced a sales volume decrease of 7.1%. Ohio and Northeast Ohio's price increases have slowed or stabilized recently, while the US sales prices continue to rise at a higher rate, which has been historically the case in our area compared with the nation. There is still a concern that home prices are rising faster than income growth.
The key point here is that the market is starting to stabilize and shifting to a seller's market. Sellers are getting more for their homes than last year, with buyers paying a bit more to purchase a home to take advantage of the low interest rates. Buyers should note that interest rates have decreased slightly, hovering around 4.5%.
This is a great time for buyers who also have a home to sell, because rates are still relatively low on the buying side, but home values have risen in many areas to improve the financial return on the selling side. If the economy continues to improve, buyers in the current market will be able to realize value gains for the homes they purchase as well.
Low inventories continue to prevent some would-be buyers from making deals. Fewer homeowners put their properties on the market in February, when compared with listing-service figures from January. Overall, new listings are down 8.3% this year.
Sales comparing February 2013 to February 2014 still show increasing sales figures. Among the 15 counties in Northeast Ohio, single family home sales are up 3.6% but a slight decline in condominium sales. and is showing a 5.7% price decrease from last February,
Ohio's sales volume showed a decline by 4.3% from February 2013, while the US market is experienced a sales volume decrease of 7.1%. Ohio and Northeast Ohio's price increases have slowed or stabilized recently, while the US sales prices continue to rise at a higher rate, which has been historically the case in our area compared with the nation. There is still a concern that home prices are rising faster than income growth.
The key point here is that the market is starting to stabilize and shifting to a seller's market. Sellers are getting more for their homes than last year, with buyers paying a bit more to purchase a home to take advantage of the low interest rates. Buyers should note that interest rates have decreased slightly, hovering around 4.5%.
This is a great time for buyers who also have a home to sell, because rates are still relatively low on the buying side, but home values have risen in many areas to improve the financial return on the selling side. If the economy continues to improve, buyers in the current market will be able to realize value gains for the homes they purchase as well.
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