Morning Briefing: 8 in 10 prospective buyers worried about interest rates

8 in 10 prospective buyers worried about interest rates

The Fed is due to announce its interest rate decision Wednesday and most analysts are pretty certain of an increase with some now predicting more than 2 further hikes this year.

New data from Berkshire Hathaway Home Services reveals that interest rates are considered the top challenge facing the real estate industry – 84 per cent of current and 81 per cent of prospective homeowners said that.

Mortgage rate increases would make 39 per cent of current owners and 65 per cent of prospective buyers “anxious”.

There is also concern among homeowners of their ability to afford to buy a home in the future if interest rates rise further. That was the view of 56 per cent of current owners and an overwhelming 81 per cent of prospective homeowners.

The likely rise in interest rates would prompt a fifth of prospective buyers to buy before further increases.

Overall, the survey reveals that sentiment on the US economy and the current state of the real estate market is trending higher.

New home mortgage apps on the rise

Applications for mortgages for new homes jumped 17 per cent in February compared to a month earlier, boosted by strong gains in employment.

The Mortgage Bankers’ Association’s Builder Application Survey revealed a more modest year-over-year rise of 2.2 per cent but the overall trend appears positive.

“The surprisingly strong employment numbers for the beginning of 2017 suggest that demand for new homes should continue to grow this year," said Lynn Fisher, MBA's Vice President of Research and Economics. "Additionally, based on the current reading, we expect seasonally adjusted new home sales to be up by about 8 per cent in February compared to a year ago."

Most loans were conventional (66.5 per cent) with FHA’s accounting for almost a fifth of applications (18.6 per cent), RHS/USDA’s 1.6 per cent and VA’s 13.6 per cent.

The average size mortgage applied for in February 2017 was $330,208, up slightly from January.

The MBA forecasts a 4.3 per cent rise in new home sales in February from a month earlier (seasonally adjusted) to a pace of 562,000 units.

Home sales ease but prices hold up in Iowa

Iowa home sales eased in February with a 4.7 per cent decline compared to a year earlier but sale prices were down just 1 per cent.

“Although sales were down a little in February, new listings were up almost 5 percent from February of last year,” said IAR President Cindy Miller. While, our inventory continues to be lower than last year, February did see an increase from January. I think the warm weather in February spurred some people to list their home anticipating an early Spring.”

The state’s real estate agents sold 1,976 homes in February with an average 91 days on market.

“With interest rates still below 4.5 per cent and warmer weather ahead, we look forward to a nice Spring boost in buying and selling,” added an optimistic Miller.