It’s Tuesday News Day and today I am talking about what causes interest rates to drop and rise. The already low home mortgage interest rate has just dropped even farther, what does this mean for home buyers in Santa Clara County.
Glimmers of hope in the housing market suggest a turnaround is near, with statistics showing stabilizing home prices and an increasing number of home sales. Yet even as housing conditions improve, mortgage interest rates remain near record-low levels.
Rates on a 30-year fixed-rate mortgage averaged 3.71% for the week ending June 14, according to Freddie Mac’s weekly survey of conforming rates. Before that week, rates had broken record lows for six weeks in a row.
It’s a situation that seems to defy supply-and-demand logic: If there’s more demand in the housing market, wouldn’t the cost of borrowing funds to buy a home be on the rise?
Mortgage rates are influenced by a number of factors, including policy decisions from the U.S. Federal Reserve and the overall economic picture both in the U.S. and abroad.
The uncertainty in Europe—including continuing worry about whether the euro zone will remain integrated and new concerns about Spain’s economy are affecting current interest rates. Out of fear, more investors are moving their money to safe havens, pushing yields on investments such as 10-year Treasury notes downward. The secondary mortgage market uses yields on the 10-year Treasury as a barometer of how to set 30-year fixed-rate interest rates.
The descent of fixed-rate mortgage rates has gone beyond most people’s expectations, however. Rates have come down a lot farther than many consumers would have thought.
While improvements in the U.S. economy can influence mortgage rates, there simply hasn’t been enough good news domestically to drive mortgage rates higher.
Prices seem to have stopped their downward spiral, but homes aren’t appreciating at rates that are normal by historical standards when looking on a national scale.
National home prices were up only 0.1% in the second quarter, from the year-early period. That’s far from the 3% to 4% appreciation expected in a healthy market. National home prices are up, and that’s the first time that’s happened in some time. This is a necessary first step to the housing recovery.
In the Santa Clara Silicon Valley we are seeing something completely different from the national housing market right now. Unlike the 0.1% price increase we are having 10%-20% increases in some of our cities since last year.
With that being said, right now we are seeing the bottom of the housing market in the South Bay Area. This is the reason why you and so many of your friends are now looking at purchasing homes. The strength of our economic recovery’s comeback, low interest rates, and consumer confidence allows us to now purchase a home.
I believe the current inventory shortage will continue into 2013 and that it will rise to about 130% of current inventory numbers. As sellers see the prices rise to what they would like to sell at we will see more homes available for sale. However at that time the comparable prices would have come up as well and you will be paying a higher price at that time so if you can, win now!
Because of the many legal and tax situations that can arise through the sale and purchase of real estate ALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
Copyright 2010-2012 by Thomas Feng, All Rights Reserved. You may reblog or republish.
* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *