Not Out of the Woods Yet
The real estate market and mortgage rates have come together, forming a perfect time to be buying a home in Georgetown or in greater D.C.
The nation’s economy is still recovering from the recession of a few years ago. If one remembers, the housing sector crashed, which was one of the catalysts for the collapse of Wall Street. Credit came to a halt and the Federal Reserve Board of Governors slashed interest rates in an effort to keep the economy from going into a depression. As a result, house prices collapsed in many markets (including some outlying areas of the Washington metropolitan area). Interest rates fell and continue to drift lower.
Overall, the housing markets are showing some signs of recovery nation-wide, but the Fed’s statement warned that the housing sector still remains depressed. The D.C. market remains more stable then most.
In the Federal Reserve Board’s most recent meeting in late April, the Fed did not deviate from its more recent statements on the outlook for the economy. The Fed is holding firm on interest rates. According to Merrill Lynch, the markets are not looking for any rate hikes until May 2014 at the earliest. Typically predictions longer than 24 months out are very rare and very hard to forecast.
Mortgage rates continue to flirt with historic lows. As we close out the month of April, 30-year purchase mortgage rates ranges in the Freddie Mac Survey showed 30-year fixed rate money averaging 3.8 percent with 0.7 of a point, and 15-year money averaging 3.18 percent with 0.6 of a point. Conforming money is for loan amounts up to $417,000. High conforming purchase money (up to $629,000 for conforming money and $729,000 on FHA money) rates are higher. Jumbo money rates are still higher.
Rates on ARMs (adjustable rate money) are around 3 percent or lower. If one is buying a home with firm plans to move in the next four or five years, an ARM can be an attractive option.
With house prices close to historic lows, and mortgage rates close to historic lows, it is a perfect time to look at buying a house. The cost of housing is very attractive. Housing prices are likely to go higher in the future. In order to get approved, a customer has to be able to show income documentation and source of funds. Low documentation loans are not available. With decent credit, some cash for a down payment (3.5 percent down for an FHA loan to $729,000) one can take advantage of today’s perfect storm.
Bill Starrels is a mortgage loan officer who lives in Georgetown. He specializes in purchase and refinance mortgages. He can be called at 703-625-7355, email, firstname.lastname@example.org