Rates Are Dropping
It’s always difficult to judge the housing market’s health on a week-by-week basis but it’s important to keep up to date on the details that constantly change as well. Last week we saw that annual percentage rates for a 30-year-fixed rate loan drop to a low that we had not seen in four months. This is a mix of several factors. First off, rates are lower due to the effects of the government shutdown – yes, it is still lingering. During the government shutdown there was speculation that the Federal Reserves would not change any of its current bond buying habits. This is good news for the mortgage industry and people looking to buy houses at a low annual percentage rate since bond buying by the government will help keep rates low. Second, economic projections for employment are slowing down. September only saw 480,000 jobs created – which was less than expected and surprisingly less than the 193,000 jobs created in August. Lower projections in employment will make investors consider government bonds safer than investment in the public sector. More investment in bonds leads to lower annual percentage rates as well.
But what about the rest of the housing market?
While this is a small snap-shot of the housing market today, how does it look in the big picture? We’re obviously doing a lot better than in 2008 and 2009. According to investment genius billionaire Warren Buffet, the housing market has progressed a considerable amount in the majority of markets since the fall of 2009 but it’s not all the way back yet. However, Buffet also states that they are “…not where I would regard as an equilibrium point, where they match household formation.” While we might not be there yet, the housing market it definitely on the right track. I believe this dip in interest rates will help those who still want to jump on the end of the low annual percentage rates in order to refinance. It will also help those looking to get into a new home. The lower the rate, the more a borrower can afford when looking for a home.
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