With interest rates still at historic lows and lending standards relaxing in 2015, many clients may be coming to you eager to buy or trade-up in 2015. And they should be!
As your client's market expert of choice, print the slide below and explain to your clients that although rates ended 2014 lower than predicted, they won't stay this low forever. Just look at the history of mortgage rates. Eventually they will rise and that is why now is a good time to buy or trade-up.
Mortgage Rates Still Low But Expected to Rise in 2015
Annual mortgage rates averaged 4.17% in 2014, which was up 19 basis points from last year’s average. Experts say this won't last and some expect rates to reach 5% in 2015. Lawrence Yun, chief economist for the National Association of REALTORS® said he expects the Fed to raise its short-term rate in the first half of 2015 due to the inflationary pressures of rising wages and rents.
For first time home-buyers, the monthly payment difference between 4.17% and 5% could prove to be prohibitive. The expected surge of Millennial buyers in 2015 will bring to the table unprecedented student loan debt, which is affecting their debt to income ratios and ultimately their ability to afford a mortgage.
Your clients might have recently read that getting a mortgage will be easier for most in 2015. While it is true that lending standards will relax a bit in 2015, it is important to let them know that the fact remains that buyers still need to be qualified. Encourage your clients to have their paperwork ready and seek pre-approval when possible. Knowing how much the client can afford before they put down the offer helps.
Much of the U.S has experienced a lull in home sales this winter due to seasonally expected winter weather. As a result, inventory is lower and fewer people are motivated to move. But when the weather warms up, likely so will mortgage rates and competition. If 2015 is the year your clients have selected to make the move, they will benefit if they start looking early and get into a new home while rates are still low. Sellers who have winter listings are motivated to sell and winter buyers may have the upper hand for the next several months.
In October 2014, Keller Williams initiated a new five part blog series, Market ahas. The quarterly series is designed to help our associates better serve as their clients’ local economists. The topics covered each quarter are mortgage rates, unemployment, price change, inventory, and GDP. This is the first article in the series for Q4 2014.