Fall 2013 Real Estate Update

November 5th, 2013

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Fall 2013 Market Perspective

In August, the seasonally adjusted annual rate of home sales jumped to the highest pace since February 2007, as many buyers made the effort to lock in rates before they rise any further.

While rates have ticked down due to the Federal Reserve’s announcement that it would not taper its unconventional asset purchases in September, rates are still likely to slowly rise through the end of the year.

Prospective buyers should take advantage of what is still a historically high level of affordability in the housing market before it diminishes. With inventory remaining tight in markets across the country, potential home sellers are still well- positioned to take advantage of the many buyers looking for opportunities and 18 months of year-over-year price increases.

Important News:  Starting on November 16, 2013, Fannie Mae (not FHA) will increase their minimum down payment requirement from three to five percent.

4 Ways Government Shutdown Affects New Mortgages                                                  from an article on Forbes.com  by business writer Brian O’Connell

Under normal conditions, home buyers would be leaping off the fence to grab lower mortgage rates, but with the shutdown, there’s enough uncertainty in the air to keep mortgage consumers on the sideline until Uncle Sam is open for business again.

Some of that uncertainty over the mortgage market and the government stoppage is linked to facts on the ground, and some is closer to fiction. “This shutdown comes at an especially bad time as new home sales and home construction are building back up. More uncertainty is not what we need.” says David Hall, President of Shore Mortgage.

With that uncertainty as a backdrop, let’s clear the air and point to four ways the shutdown really does impact the mortgage market:

1) Lower rates may be due to the shutdown – By and large, mortgage rates move with the direction of the economy. If banks and mortgage lenders think the economy is slowing – as it likely will under a prolonged shutdown – they will lower rates to attract more business.

In fact, rates remain fairly unscathed

at this point, although there is an upward bias,” says Bob Van Gilder, a mortgage broker at Finance One Mortgage. “There may be some bumps in the road as the I.R.S. and the Social Security Administration have limited services, which will affect the mortgage process. Bottom line, if you are being offered a rate that is attractive to you, take it. You can’t lose by being able to sleep at night.”

2) FHA loans will be affected – If you’re a consumer waiting on a Federal Housing Administration (FHA) loan, you could be out of luck for now. In fact, approved mortgages will certainly be slowed while the FHA is shut down, even as it provides other services to the public.

The reason is this:  with any FHA loan, mortgage services firms have to order an FHA case number, prior to an appraisal on the home. With the FHA’s lights out, those case numbers can’t be processed. Expect that process to take longer with fewer hands on deck.

3) I.R.S. documents are out of reach – Another consequence of the U.S. government shutdown is the inability of mortgage firms to verify a borrower’s income via his or her U.S. tax returns. By law, any mortgage loan approval is subject to the review by the mortgage lender of at least one year’s worth of federal tax returns, and must be verified by the I.R.S. through a 4506 Transcript. With I.R.S. staffers at home, that process is stalled as tax agency workers would be unable to verify tax return documents.

4) A weaker U.S. housing market – The U.S. Housing and Urban Development, which runs the Federal Housing Authority, only has 337 out of 8,709 managers and staffers on the job this week. The longer HUD is blacked out, the more potential problems for the U.S. housing market.

The birds-eye view?  The mortgage market should largely remain up and running during the government shutdown, and home buyers may even get a bonus, if mortgage rates keep falling while government agencies are shuttered. By no means it is a perfect scenario, but for home buyers, sellers, and real estate professionals, it’s certainly a survivable one.

Let’s Look at the National Numbers

Interest rates have moderated, thanks to the Federal Reserve’s decision to continue its quantitative easing policies.  30-year fixed-rate mortgages are currently 4.32%, with 15-year rates at 3.37% and 5-year adjustable rates at 2.63%.  While the Fed’s policy announcement has helped rates in the near term, we should expect them to continue to increase as the overall economy improves.

Mortgage Rates for Washington State

Rate Current Last Week
30yr fixed 4.16% 4.09%
15yr fixed 3.2% 3.13%
5/1 ARM 2.88% 2.91%

Home Prices

In August the median existing home price dipped slightly from the previous month to $212,100. Median price was down only 0.7% from July but was up 14.7% from last August. Home prices typically dip later in the year, so the current month- to- month trend is not concerning. However, the year-over-year rises in home prices bode well and will continue to help boost more homeowners out of negative equity positions.

Inventory

The number of homes available for sale in August increased slightly but was not enough to keep up with the jump in buyer activity. This brought months’ supply of inventory, which takes into account inventory levels and sales rates, down 3.9% from last month to a current supply of 4.9 months of inventory.

What Should You do in this market?

Whether you are a Seller, a Buyer or an Investor, there are lots of good opportunities in today’s market.  I’m always available to consult with you to help you assess and achieve your real estate goals.

Barbara Magnuson     253-307-4504

 

 

 

 

 

 

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Contact Barb Magnuson

Magnuson Residential & Commercial Properties
Keller Williams Realty - West Sound
11515 Burnham Drive NW, Gig Harbor, WA 98332
(253) 307-4505
(253)851-4511
(253) 857-8700

barbmagnuson@gmail.com

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