In one of our recent Trend Visions articles, we mentioned that we anticipate mortgage rates to remain low, thanks in part to a somewhat weak worldwide economic growth. But how low is low, and how long will this boost to real estate sales last?
In August, the 30-year fixed mortgage, now the most popular mortgage product, averages 3.44%. When looking back at August of 2015, the rate has dropped from the 3.91% we saw then. For adjustable rate mortgages, the August 2016 average was 2.75% and the August 2015 rate was virtually unchanged at 2.74%.
What does that mean as we move forward in Q4 of 2016? Although mortgage rates are anticipated to rise eventually, the Federal Reserve just announced that is it leaving its Federal Funds Rate unchanged for the time being. And according to Bankrate.com’s mortgage rate trend index, and many experts, rates are actually expected to continue to fall before they rise. But the rise will indeed come, likely in December. Some experts are expecting the rate to go as high as 3.8% by the end of the year.
Mortgage Rates and Real Estate Sales
According to the Washington Post and the Freddie Mac monthly outlook, this year is looking to be the best in real estate sales since 2006. Continuing at the current interest rate pace, the average 2016 interest rate for a 30-year fixed mortgage will be 3.6%. That would make 2016 the lowest annual average in 40 years. The previous lowest rate was 3.66% in 2012.
The housing market is a “bright spot” in the U.S. economy right now, according to Freddie Mac Chief Economist Sean Becketti. So in many markets, the low interest rate helps to offset the rising home prices, helping real estate sales to be more affordable for the average home buyer.
But here’s the other side. Despite the low interest rates, and the National Association of Realtors reporting the highest number of first-time home buyers since 2012, mortgage applications are actually down across the board – both loan-applications and refinances. The refinance index fell 8% and the purchase index fell 7%. And the declines are expected to continue through 2017. This could be in anticipation of the looming rate hikes.
But despite the potential increase in rates, which would still keep rates lower than a year ago or a couple years ago, the housing marketing is expected to continue to strength, especially as the job market grows. This is of course great news for real estate sales throughout the country, including Sonoma County and Marin County.
Wondering how to take advantage of the lowest mortgage rates in decades, and the slower luxury real estate market in the San Francisco Bay area? Rebecca Celli, luxury real estate sales expert, can help! Contact us today to find your dream property in one of the best areas of the country to live!