This week has been a big one for both equity investors and home market buyers. The Federal Reserve announced on Wednesday that it doesn’t expect to implement a rate increase in 2019, which could help to stabilize mortgage rates or send them even lower after this month.
The 30-year fixed mortgage rate hit an average of 4.28% on Thursday, making it a 13-month low. Average rates have only seen two intra-week increases in 2019, making the current market ideal for buyers.
We’re Now in the Sweet Spot for Home Market Loans
While home prices are still higher than they have been in recent years, real wages have also increased. Unemployment is at a record low, and more people can see home ownership as a reality.
This was reflected in a jump in mortgage applications this week. New applications increased 1.6% in tandem with rates trending downwards. It’s not just the 30-year fixed mortgage that is attractive. The 15-year adjustable rate average was 3.71% this week, a notable decrease from 3.76%.
Lower rates help the market. They can increase the number of buyers which could help sellers to move their inventory. For mid-priced homes, the market looks particularly interesting today, with buyers having the slight upper hand, due to an excess supply.
Entry Level Home Inventories are Decreasing
While this is all good news, there is one point of concern for home market analysts. Entry level home inventories are decreasing, and new homes are not being built at a rate to sustain demand in this market segment.
The influx of mortgage applications suggests that first time buyers are snapping up bargain listings, however, more data is needed to see what’s really happening here. Spring is a high selling season, so useful metrics will be gathered over the next three months.
What’s the home market Takeaway for Buyers and Sellers?
Buyers gain the most from low interest rates. Home ownership becomes more accessible. Large inventories above the entry-level put buyers in a strong position to negotiate with sellers who have been dealing with a stagnating market.
While this may cause sellers to lose some of their leverage, the upside is that mid-priced homes could spend less time on the market. Even if sellers must discount in negotiation, they could benefit from closing sales quickly and moving on to the next investment.
The Federal Reserve showed signs that the economy is slowing and that a recession could be on the horizon, even if nobody can see it yet. In the meantime, the home market is picking up steam, and that is excellent news for the average American.
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