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As Rates Rise: 4 Things to Expect in Housing

futureOrange County, CA – Mortgage rates may have momentarily stabilized, but as the Fed eases up on purchases of mortgage-backed securities over the next year or more, they’ll continue to rise with each new month’s smaller purchase. What does that mean for you? It means that it’s a safe bet that mortgage rates are going up for at least the next twelve months. What can you expect to see?

  1. Loans are still cheaper now than they will be anytime soon. You may have missed out on the record low rates of the past couple of years, but it’s still going to be wothwhile to move quickly on any deals you’re considering. The longer you wait, the more you’ll pay. Some companies are predicting that rates will keep rising to as much as 6% by 2017. There’s no benefit to delaying unless you have specific circumstances that require you to hold off.
  2. The housing recovery isn’t going anywhere. Some experts are predicting that the uptick in mortgage rates is going to discourage Americans from buying new houses, plateauing the housing recovery. That’s flat-out not going to happen. Mortgages are still inexpensive compared to the historical average and rising home values will encourage both sellers and buyers to enter the market.
  3.  Housing prices will continue to rise. Housing prices and mortgage rates are affected by market forces of supply and demand.  There is a pent up demand for houses and a lack of supply. Homebuilders were woefully behind in building over the past 5-6 years. Now they need to build 16 million more units over the next 10 years just to catch up with the backlog. This will keep prices moving upward. 
  4. Rents will start to drop as new construction starts to catch up to demand. The rental market right now is absurd. Rents are higher than they’ve been in decades. New construction on rentals is progressing heavily across the country. As buyers work hard to move into their own homes, a number of those rentals will end up empty. Landlords will have to cut prices to fill thier units. Until mortgage rates climb well higher and rental rates decline, it simply makes financial sense to buy. You’ll see from that article that the affordability index has changed directions. With rising rates and prices the trend has shifted. It’s best to take advantage while you can. Your family will still be able to afford more home than in decades and end up with a significant asset.

Contact me for help or to find out what you may qualify for.

Scott Storace

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