We recently talked about the Fed tapering their stimulus package in 2014, and how mortgage rates were anticipated to rise in response.  The trend is expected to continue in full force.

Here are the current mortgage rate projections from KCM blog:

Janet Yellen, the replacement for Ben Bernanke as Fed Chair, made it quite clear in her testimony for the Financial Services Committee recently, that she will continue to taper bond purchases at the currently established level.

“In December, the Committee judged that the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions warranted a modest reduction in the pace of purchases, from $45 billion to $40 billion per month of longer-term Treasury securities and from $40 billion to $35 billion per month of agency mortgage-backed securities. At its January meeting, the Committee decided to make additional reductions of the same magnitude. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings."

What does this mean for buyers?

Home Sales At a 7 Year High - Now is the Time to BuySome fantastic news from the KCM blog was recently shared, indicating national American home sales have reached a 7 hear high as of the end of January.  The housing market appears well on the way to (if not already at the point of) stabilization.

13,945 houses are being sold every day, on average, according to the National Association of Realtor's recent Existing Home Sales Report.  Additionally, sales have increased 9.1% since 2012, and that this is the best performance the market has seen since 2006. 

This means that, despite rising interest rates, home sales are in a great place.  Now is a great time for first-time homebuyers to explore the market, or for existing homeowners to move up to a better home.

Interest rates, while rising, are still below 5% which keeps the doors open for many prospective homebuyers.  Homebuyers are encouraged to start now rather than later, as waiting to buy will, in fact, reduce potential purchasing power.  As the rates continue to increase as they are expected to, buyer's purchasing power will decrease, as this KCM graph indicates:

The Fannie Mae January 2014 National Housing survey results recently released revealed two categories with all-time survey highs.

  • 52% responded that they believed it would be easy for them to get a mortgage today
  • 70% responded they would buy a home if they planned on moving

These results indicate an escalating increase in buying confidence that is being experienced nationwide.  It is also a healthy indication that the housing recovery process is indeed going smoothly and with an upward trend.  Positive trends illustrate a positive perspective surrounding economic and personal finance situations, and lends itself well to a continuation of the home improvement.

Chief economist at Fannie Mae, Doug Duncan, explained the survey results in this way:

“A majority of consumers now believe that it is getting easier to get a mortgage. For the first time in the National Housing Survey’s three-and-a-half-year history, the share of respondents who said it is easy to get a mortgage surpassed the 50-percent mark. The gradual upward trend in this indicator during the last few months bodes well for the housing recovery and may be contributing to this month’s increase in consumers’ intention to buy rather than rent their next home. The dip in overall home price expectations, though notable, is consistent with our view of moderating home price gains this year from a robust pace last year, while positive trends in perceptions about the economy and personal finances over the next year support our view of stronger growth in the broader economy.”

As home prices are expected to increase in 2014 in conjunction with rising mortgage interest rates, these mentality trends displayed by consumers is exceptionally good news.

Housing inventory has come a long way since 2008 and 2009, when we were experiencing an over-supply.  In fact, according to Chicago Agent Magazine, one of the biggest components of the housing recovery many homebuyers have been experiencing in recent years is competition.

According to the NAR, Chicago has experienced ample change.  Housing inventory has dropped 14.65% in yearly (YOY) statistics, and 11.54% in monthly (MOM).

For more information, view the interactive graph from Agent Publishing.

This data supports "prepared buyer" mentality.  That is, with a still relatively narrow market, prospective homebuyers should have a good knowledge of the home that they're looking to find, and have all preliminary documentation in place to use for an offer when that home does surface.

If you are looking to buy in the new year and aren't sure what these figures mean to you, send us an email or give us a call and we will be happy to help you with your process.

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