The housing market has shown signs of improvement in recent months. Millions of Americans have equity in their homes for the first time since the housing crash and markets in many cities are seeing signs of recovery. Many experts, including Michael Cudzil of Pacific Investment Management Co., say that is in part due to the Federal Reserve buying debt. This has held down the cost of borrowing for home buyers and prompted investors to buy property rather than bonds. In an interview with Bloomberg Radio Cudzil said, “It’s definitely had a positive impact on the housing marketing… You’re actually starting to see money moving out of the capital markets and into real estate.”
This is fantastic news for home owners that are looking to sell their home this year. Many people have felt stuck in their homes waiting for the market to improve enough to sell. Those looking to trade in a starter home for something larger should take advantage of the current housing market and do so this year. Home values are rising with 20 metropolitan areas seeing an increase in home values of 9% from March 2012 to January 2013. This will especially be felt in the higher home prices as a slight bump represents tens of thousands of dollars. The increase in home values is in part due to institutional investors, like Blackstone Group LP (BX) purchasing homes to rent out.
Analysts are predicting that home values will increase by 8 to 12 percent in the next two years. The Federal Reserve has a direct impact on this since their actions are keeping mortgage interest rates low. Right now it can be cheaper for a family to buy a home then to rent one. As more people become aware of the current savings and affordability of buying a home, purchases will increase.
The goal for home buyers is to act now. There is currently a perfect combination of home prices that are still low with historically low mortgage interest rates. The combination of these two factors make owning a home an affordable option. As home values rise people that are on the border of being able to purchase, or not qualifying, may be unable to buy. A home selling for $400,000 today would sell for $436,000 next year if values increased by 9%. The conventional loan limit is $417,000 and anything over that is a jumbo loan. One year may not seem like a lot of time but that value increase can make the difference between paying 3% down ($12,000) for an FHA mortgage loan or $19,000 just to get to the conforming loan limit. Contact an FHA approved lender today to see if you qualify and pull the trigger on purchasing your home. Acting now can save you thousands of dollars.
For existing home owners the rising home values should give you confidence that you will once again have options on what to do with your existing home. Selling and upgrading, or downsizing, will become possible as you gain equity back. In the meantime there are other refinance programs like HARP that can help borrowers in depressed housing markets.
