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Sign into your accountFewer First-Timers, More Repeat Buyers in 2014
January 26 2014
This post comes to us from the Market Leader blog:
Low housing inventories and über-low interest rates combined to make the housing sector the economy's comeback kid in 2013. Like a precarious stack of Jenga cubes, however, pull one leg out from under that delicate balance and the whole thing comes crashing down – or at least changes dramatically. If you prefer working with first-time buyers, be prepared to either diversify your client base or have a very slow 2014. Or so the news coming from housing industry experts indicates.
Interest Rates
The favorite mortgage of most first-time buyers – the 30-year fixed – may be unaffordable for many in 2014. Rates are expected to hit and hover at 5.5 percent, according to NAR chief economist Lawrence Yun. He chalks up the interest rate rise to the tapering of quantitative easing. Bankrate.com's senior financial analyst, Greg McBride, agrees, but feels that we won't see 5.5 percent interest rates until after mid-summer.
Since each percentage point rise in the interest rate adds about 10 percent to a mortgage loan, higher housing payments may just kick some first-time buyers to the sidelines. It's definitely time to turn up the heat under any lollygagging buyers to get them into a mortgage and a home before they are priced out of the market.