Throughout the spring and summer months, the homebuying season is in full swing. In fact, a report from Freddie Mac explained that almost half of all home sales for 2015 will be made between April and June.
While the warmer months always see an uptick in sales, this year could be the best year for perspective homeowners to buy. Lawrence Yun, chief economist for the National Association of Realtors, explained this season could be very different from years past.
"It looks like it's going to be a very solid spring season," said Yun. "The buyer traffic, the pending contract activity; there is enough buying activity. One constraining factor is the supply: there's just not enough to satisfy demand and hence prices are getting bid up a little too high."
Conventional mortgages lower down payment rates
In the past, conventional mortgage lenders required at least a 5 percent down payment from buyers. This lead to homes that were purchased at $300,000 requiring a $15,000 out-of-pocket down payment. That made homebuying a difficult task for those looking to get a home loan, but this year, things have changed.
Freddie Mac and Fannie Mae switched the minimum down payment percentage from 5 percent to 3 percent for 2015. This dramatically changes the affordability picture and allows first-time buyers to get their house much faster. So, whether you're a first-time or veteran homebuyer, 2015 could definitely be the year to make the move and buy a new home.
Lower interest rates for the time being
Since the financial crisis, mortgage rates have had to slowly build back up, and have hung around 4 percent for the past couple of years. However, many experts believe these low interest rates won't stick around much longer, making 2015 one of the better years to buy a new home.
Actually, many housing market analysts believe interest rates will rise up to 5 percent by the end of the year. This could add roughly $100 to a monthly payment on a 15-year fixed-rate mortgage for a $200,000 home. This gives homebuyers a clear window to take advantage of the housing market right now before interest rates hike up by December 2015.
Housing prices only increasing
Another reason 2015 seems like great year to buy is that housing prices appear to be gradually increasing each year. Some in-demand regions, such as San Francisco Bay Area, have seen houses sold for 108 percent of the predicted market value.
"A fixed mortgage rate could be a much more viable option than renting."
On the other hand, areas that are much less in demand, such as St. Louis and Pittsburgh, saw houses sold for roughly 77 percent and 82 percent, respectively, of estimated market value.
"A lot of that is because rents are quite high in several of the major markets," said Ralph McLaughlin, an economist for the housing market with Trulia, according to Forbes. "It's a bit of a double-whammy for first-time homebuyers who may be wanting to purchase their first house. Even though it is a good time to buy because rents are quite high, it can make saving up for a down payment quite difficult."
Rent is going through the roof
In major markets, rent prices have steadily increased every year, which leads to even more unpredictability in the rental market. While renting certainly allows people to be flexible with their decisions and save money on home repairs and maintenance, the prices in many major cities are unlikely to decline anytime soon.
Going with a fixed mortgage rate could be a much more viable option for potential homeowners and eventually save them money over time. To receive more information on your homebuying decision, visit one of our branches and speak with a home loan specialist to get the peace of mind you want in the homebuying experience.
For more information about smart ways to manage your finances, contact Landmark Bank.
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