2015 Real Estate Market

 2015 Early Market Update

This is the time of year for forecasts and market predictions.  What will 2015 bring?  Will the market improve?  What kind of year can we expect?

We are hearing cautious optimism of a solid to strong year in real estate.  Our very early numbers are consistent with this prediction, with Sales orders from December 1^st through January 15^th up 28% over the same time last year!

Interest rates continue to influence the market, again nearing historic lows.  Mortgages traditionally follow the movement of the bond market. On Friday, the 10-year Bond Yield dipped to 1.76%.  To put this in perspective, Bond rates have only dipped lower for a short time in 2012, when Mortgage rates hit their all time low (just under 3.5%).

Indeed, local Mortgage Rates dropped from 3.8% at the beginning of the year to today’s 3.6%.  It is conceivable they could go lower. This is good news for home affordability (and a good thing for buyers to know when considering houses), but signals weakness in the economy and markets.  Despite the weak stock market, NAR, Freddie Mac, and the Mortgage Banker’s Association all predict robust growth in housing sales in 2015 and an even better 2016!

Thank you to my friend Joe Long at Waterstone Mortgage for this graphic and information. It is significant and unusual that all three predictions match so closely.  Interest rates will likely rise by year end, and this could dampen the market.  Nevertheless, interest rates may not be as important as consumer confidence, especially confidence about Jobs.  If people feel secure in their jobs and confident in their ability keep employed, they buy houses. The national jobs numbers have been strong, with 2014 having the best rate of job creation since 1999.

All of this should translate into a solid 2015. And, so far, our numbers are consistent with this hopeful prediction.  Happy New Year and we hope you have a healthy and prosperous 2015!

Homestead Title Company

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Mortgage Rates And The Market

Up, Up, and Away

Rates on the Rise, But Sales Remain HOT

Mortgage rates spiked over the last two weeks. In fact, since the end of April, the average rate on a 30-year fixed rate mortgage increased by nearly 25%.

Pressure From The Fed Kept Rates Low

The Fed had helped keep mortgage rates low through a bond purchase program called Quantitative Easing (QE for short). But, recent announcements by Fed Chairman Ben Bernanke signaling a slow down or end to QE spooked the market.

Mortgage rates jumped and have continued to rise since those announcements.

Real Estate Market Continues Hot Streak

Despite rising rates, the real estate market remains hot. Realtors continue to be overwhelmed with activity and many sellers are seeing multiple offers near or at asking price.  Homestead’s numbers are no different. After an incredible year of growth in 2012, we have seen a 30% year over year increase in closings. And, despite the jump in interest rates from April to June, our new orders have not slowed.

Homestead’s growth is both a function of a strong market and of our strong commitment and passion to making the closing process easier for our customers and clients. Our values of caring, empathy, flexibility, loyalty and a hands-on, education based approach have cemented a loyal following of Realtors and do-it-yourself sellers.

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Mortgage Rates, QE, and Wonky Talk

Mortgage Rates Shot Up This Week

Mortgage rates shot up this week and many are wondering why and what’s next. Homestead Title is going wonky today and dabbling in the guessing game of mortgage rates.

Bonds and Mortgage Rates

Mortgage Rates tend to follow long term bonds and, specifically, the 10 year Treasury Bond market. As bond yields increase, mortgage rates go up. And, sure enough, bond yields rose this week. But, most economists believe there is a much stronger force at play that has kept interest rates low. It is called the Fed and its program of Quantitative Easing.

Quantitative Easing Explained

The Federal Reserve has ways of influencing the economy. Its primary tool is to lower the interest rate charged to banks for inter-bank lending. By lowering the cost of money they hope Banks will borrow more, lend more freely, and spur economic growth.

Over the past 4 years, the Fed lowered rates to nearly zero, yet banks still weren’t lending enough and the economy wasn’t growing fast enough. In fact, banks were borrowing this cheap money and using it to buy safe bonds that paid a small return. Unable to lower the cost of money, the Fed sought to influence the quantity of money (hence the term Quantitative Easing). They pumped cash into the economy by buying up the same bonds and safe investments that banks were buying. This lowered the yields on bonds and indirectly lowered mortgage rates.

And sure enough, people borrowed. This spring has seen a surge in the real estate market and low interest rates have surely played a role.

Why Did Rates Rise Suddenly This Week?

When the Fed talks, the markets listen. On May 22, Federal Reserve Chairman Ben Bernanke suggested that the Fed might slow down or stop Quantitative Easing sooner than expected. The markets and banks reacted strongly (some would say they overreacted) and mortgage rates spiked.

What Will Happen Next

We’re a Title Company, not fortune tellers. If we could accurately predict the economy, we’d be on a beach in the Caribbean. But we can report what other’s are saying. Many economists think this is still a volatile market and rates will drop back down. It is hard to imagine rates dropping back to the historic lows of the last year, but we never imagined that was possible in the first place. Rates are still well below 4%, which is a screaming deal by comparison to rates over the last 50 years.

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