It's widely known that summer is a popular time to buy a home, so what's currently happening in the housing industry? Is it a good time to buy? Here are some things you should know about mortgage rates, loan programs, inventory, and home prices so far this summer.
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First-time homebuyers are making their way into the market.
Sales of existing homes climbed 5.1 percent in May to a seasonally adjusted annual rate of 5.35 million. Not only was May 2015 the largest month for sales of existing homes since November 2009, but 32% of those sales were to first-time homebuyers, up 5% year-over-year.
The presence of first-time homebuyers in the market signals consumers are becoming increasingly confident they can afford to own a home.
Home prices are increasing.
While the fact that more Americans bought homes in May is positive, this sign of economic improvement (coupled with other factors) is also pushing up average home prices. Median existing home prices have climbed 7.9 percent over the past 12 months to $228,700, approximately $1,700 shy of the July 2006 peak, according to the National Association of Realtors.
Consumers who are on the fence about purchasing a home may benefit from choosing homeownership sooner than later if home prices in their area are continuing to rise.
Mortgage rates are still near record lows.
The Federal Reserve's Open Market Committee (FOMC) met on June 16 and 17 to discuss their current fiscal policy, as well as the timing of the first federal funds rate hike. It was decided that the federal funds rate was to remain in the low target range of 0%-0.25% for now.
While the Fed doesn't directly control long-term mortgage rates, the federal funds rate has significant influence on them and other lending and savings rates. The Fed's monetary policy has helped boost the U.S. housing market by indirectly keeping long-term mortgage rates near record-lows.
For now, the Fed won't be issuing a rate hike, which is a plus for summer homebuyers and mortgage rates.
Inventory shortages have eased, but certain areas are still lacking supply.
A tight housing market can lead to bidding wars, above-market offers, and an overall seller's market, but recent trends show that the inventory crunch may be easing.
The total number of homes listed for sale in the U.S. increased 3.8 percent from April to May, though inventory had declined 15.7 percent overall last year.
Builders have been gearing up for increased demand with housing starts and permits soaring from March to April. April housing starts surged 22.1 percent from March. The latest rate of permits is the best since August 2007.
New home sale inventory stood at 206,000 at the end of May, a 4.5-month supply at the current sales pace. While sales of new homes currently represent only 10% of the housing market, existing homes inventory stood at a 5.1-month supply. According to Forbes, economists traditionally say a 6-month supply is necessary to balance supply and demand.
Low down payment programs enable homebuyers to enter the market.
A large majority of first-time homebuyers cite gathering funds for a down payment as their biggest homebuying hurdle. Due to a change in the FHA loan program, FHA loans are making homeownership more affordable than ever for first-time (and repeat) homebuyers, coupled with their standard low 3.5 percent required down payment and across-the-board interest rate for qualified borrowers.
Effective January 26, 2015, the U.S. Department of Housing and Urban Development lowered annual FHA mortgage insurance premiums from 1.35% to .85% on 30-year fixed rate mortgages for new FHA loans of $625,000 or less.
If you're interested in buying a home this summer, contact one of our mortgage bankers or get pre-approved. For more information about home buying and financing, in general, download our free Mortgage 101 Handbook.