Aug 2, 2018: Long-term rates rose slightly last week to 4.6% for 30-year fixed-rate mortgages. The average 15-year rate increased from 4.02% to 4.08%. What does this mean for Florida home buyers and sellers?
How should home owners wanting to sell their homes and home buyers looking to find a new home respond to the rise in interest rates? First let’s look at the details and then we’ll make some observations and recommendations.
Mortgage buyer Freddie Mac said Thursday the average rate on 30-year, fixed-rate mortgages jumped to 4.60 percent this week from 4.54 percent last week. Long-term loan rates have been running at their highest levels in seven years. The average benchmark 30-year rate reached a high this year of 4.66 percent on May 24. By contrast, the rate stood at 3.93 percent a year ago.
The Federal Reserve on Wednesday left its key interest rate unchanged but signaled further gradual rate hikes in the months ahead as long as the economy stays healthy. As prices for U.S. Treasury bonds have dropped, the yield on the benchmark 10-year note rose to 3 percent this week for the first time since mid-June. The rate was at 2.99 percent Thursday morning. Higher yields on Treasury bonds tend to push interest rates higher on mortgages and other loans.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. The average fee on 30-year fixed-rate mortgages declined to 0.4 point from 0.5 point last week. The fee on 15-year mortgages was unchanged at 0.4 point. The average rate for five-year adjustable-rate mortgages rose to 3.93 percent from 3.87 percent last week. The fee dropped to 0.2 point from 0.4 point 1.
Observations and Recommendations
For home owners, rising interest rates should be a signal that now may be the best time to sell. When mortgage rates increase, the amount of home that a given buyer can afford decreases. If you are seriously considering selling your home then I recommend you begin investigating your options now. Don’t put it off too long. At 4% for a 30-year mortgage on a $300,000 home the monthly payment (principle and interest only) is about $1432. At 4.5% the payment is about $1520, almost $100 more. To put it another way, the buyer can now afford to buy a $283,000 home, down from $300,000. Contact us we’ll provide with detailed information on what your home should sell for in this market and more importantly we’ll show you exactly why it should sell for a given price. In fact, you can receive an instant market analysis online right now – Get My Market Analysis.
If you are looking to buy a home in the Sarasota area, I would offer the same advice to you. Now may be the best time to move forward and find your new home. Interest rates are still very low. Just 10 years ago the average 30-year rate was 6.48% and 15 years ago it was 6.92% 2. Rates are still great! Start your home-buying journey now so you can get the most home for your money. Contact us today and we’ll sit down with you to determine exactly what you are looking for. Then we’ll be able to make great recommendations so you can find the best home that fits your individual needs and wants.
Other Things to Consider
Many home buyers in the Sarasota area, especially those looking for homes and condos in the $250,000 to $350,000 range are cash buyers. In fact, we recently had one of our condos listed at $1.900,000 go under contract with a cash buyer. Many buyers in this area are purchasing a second home or are downsizing, and can afford to pay cash for their Sarasota home. Looking back at the condos and villas we’ve sold over the last few years and I would say that about 1/2 of the transactions have been for cash.
Buyers, the first and most important thing you can do when thinking of purchasing a home is to get pre-approved for a mortgage. This will do 2 things. First it will let you know exactly how much home you can qualify for. Second it sends a strong signal to the seller when you make an offer, letting them know you are a serious, capable buyer.
We’ll keep an eye on the mortgage rates, home prices and local trends as we always do, so feel free to ask us any questions you might have, even if you aren’t in the market right now. Real Estate fascinates us and watching the market is one of our favorite pastimes!
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- FreddieMac Mortgage Rate History