TODAY’S AVAILABLE HOMES ARE A MUCH BETTER VALUE THANKS TO LOW INTEREST RATES ON MORTGAGES

New home construction has enjoyed a renewed lift in sales thanks to the plummeting interest rates on mortgages over the last month.

In February 2015 the Census Bureau reported sales of new construction up by 8 percent over January of 2015. That sales jump marks the highest point in annualized transactions in a seven year period. The real estate market as a whole is recovering strongly as demand for homes increases at a breakneck pace. Inventory of existing homes struggles to keep up with the renewed demand by buyers now able to qualify for loans and afford them thanks to the lowest interest rates in recorded history.

4% has long been the dividing line between the perceived high and low mark in interest in the public’s mind. 30 year conventional loans have breached that line since the beginning of the year with mortgage rates below 4%. FHA and VA loans are even better, often falling into the low 3s since late in 2014.

Along with better rates, loans are easier for buyers to get since lenders have relaxed the guidelines following a near decade of stringent tightening following the real estate crash. Ellie Mae, the nation’s leading software provider for lenders reports lenders approving almost 70% of all applications for the purchase of homes. That’s an unprecedented amount, exceeding any levels since the creation of the tracking programs.

This is the perfect time to be looking for a new home. With great interest rates and access to loans you can find the best deals ever in the market today.

HIGH SALES AND LOW INVENTORY ADD TO THE DEMAND FOR NEW HOME CONSTRUCTION

HUD reports for February of 2015 show 539,000 new home sales adjusted for season on an annual basis. The designation “new home” is reserved for any structure not previously occupied. The HUD report for February marks the highest point in new home sales since 2008 and a huge 25 percent leap in just one year. Even the nation’s top economists didn’t predict such a large jump in sales.

The monthly report published by the National Association of Homebuilders shows that homebuilders are gaining in confidence with the new market figures. In spite of the growing confidence and booming real estate market, the report surprisingly shows that some of the confidence homebuilders have been exhibiting is falling due to a decrease in foot traffic that has lowered their sales predictions.

REAL ESTATE INVENTORY BULLISH

Home sales are at a seven year high with buyers grabbing up all of the available inventory on the market. Demand remains strong and that is pushing the real estate market into a strong “bullish” period where the power is shifting from buyer to seller. HUD reported 210,000 homes for sale in February across the nation. This figure marks a 13% rise from last year. In spite of the increase in available homes, the supply can’t keep up with the demand, so inventory for new home buyers is tight.

The current market pace indicates that the available new homes will be gone in just 4.7 months, the fastest sales rate since 2013.

The breaking point for the power of the market is six months. When existing inventory is expected to keep up or exceed the six month mark it is considered a buyer’s market with sellers struggling to sell their properties. When inventory is expected to be depleted before the six month mark, sellers are more in control of the transaction. That is a bull market sign.

Home buyers today have less leverage when dealing with builders. There are fewer incentives offered such as free upgrades or price reductions. Along with a slow supply increase in new homes over the last several years, prices have increased.

NEW LOW MORTGAGE RATES ALLOW BUYERS TO AFFORD NEW HOMES AT BETTER PRICES

In spite of the seller’s power in the market and the higher cost of new construction, home buyers still have an advantage. People looking to buy a home in today’s market are taking advantage of the great low interest rates to be able to afford the homes they want.

According to Freddie Mac’s weekly survey, conventional mortgage rates on 30 year loans are down to 3.78%. Prime borrowers who can pay a small discount at closing can get the best deals in almost two years. The rates on conventional mortgages have gone down 75 basis points in just a year. That is an amazing decline. Rates on VA and other federal loan programs such as USDA and FHA loans are lower yet. There are many added bonuses available to buyers as well such as no or low down payment options, no closing cost options and other discounts that can make a home purchase today very affordable.

Home buyers looking for the best deals should find out if they qualify for federal programs. FHA loan programs offer great down payment options with some as low as 3.5%, and only require a FICO credit score of 580 or higher. These types of loans made up 17% of all closed transactions in December of 2014.

Some other programs include Conventional 97, a 3% down payment option available through Fannie Mae and Freddie Mac. The fact that conventional mortgage companies are now offering such incentives proves the strength of the market and desirable atmosphere for buyers.

Buyers who have served in the military have many great options through the VA loan program. VA loans allow 100% financing, so no down payment is required at all. There is no mortgage insurance requirement on a VA loan either.

For buyers looking to get away from it all, the USDA offers loan incentives for rural property purchases. The Rural Housing Loan is a 100% loan with no down payment required and is even available in some suburban areas where there is a low population density.

 

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