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The Fate of the Housing Market

In recent months, the housing market has shown a great increase in average home price, reaching nearly 12.1%. Separately, data from the National Association of Realtors showed that existing home sales were running at a seasonally adjusted annual rate of 5.39 million homes for July, a jump from 5.06 million homes in June. The reason for such a high number of sold homes is more than likely due to the rising interest rates, up from 3.5% in March to 4.58% for a 30-year mortgage. Despite this historic rise in mortgage rates in such a short period of time, there has not been a delay in the real estate recovery. Here are some reasons why this may be.

  1. The housing index is a three-month rolling average that includes the month of April and May. Since most of the increases have been recently, it may encourage buyers to keep investing in the market until rates are even higher.
  2. Cash is increasingly being used to purchase homes instead of taking out a loan. More than 50 percent of homes purchased in 2013 have been made without a mortgage. It is assumed that the majority of these buyers are foreign investors or wealthy homeowners who don’t want to go through the hassle of taking out a mortgage.
  3. An ever-improving economy may be the actual reason for the rising interest rates. Although some research signifies that the hints of the Federal Reserve pulling back on its stimulus efforts or the increased inflation expectations may be the reason behind the interest rate climb, others believe the economy to be improving in a number of sectors. Home price growth will occur in the presence of higher interest rates.

 

A healthy economy can mean a number of positive things for homeowners. If you are looking at potentially selling in the near future, but are afraid that you may be losing value on your home due to the need for an installation or remodeling of a current room or outside project, please contact us today for assistance.

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