Young Buyers Get Ready

Some market observers believe that young Americans who were growing up during the housing crisis will remain reluctant to purchase their own home as a result. Yet recent surveys show that adults ages 22-34, commonly referred to as “millennials,” are eager to become homeowners.

However, researchers say that later marriages are causing them to put off purchasing real estate. “Not having two income streams makes it much harder to scratch together a down payment,” notes Time magazine.

“Once this generation begins to tie the knot,” adds Time, “it’ll be buying homes at least as frequently as older Americans once did.”

Time goes on to report that surveys reveal young Americans are more likely than their parents and older siblings to crave living in their own place. “If anything,” Time states, “buying a home seems to be getting more attractive, not less.”

And once they have children, they’re more likely to want to move from an urban setting into the suburbs where they’ll have more room. “America’s newest adult generation isn’t that different from the previous ones,” Time notes. “Millennials may Instagram their new home instead of sending photos through the mail, but not much else has changed.”

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Real Estate Markets on Upswing

America’s economy is set to grow at around the fastest pace seen in a decade, forecasts mortgage investment firm Freddie Mac. A solid expansion will encourage increased household formation and subsequent home buying.

However, Freddie Mac believes interest rates will rise this year, so it’s important to act on your home purchase plans soon. Real estate values are expected to go up three percent in 2015, as well.

Consumer price inflation is predicted to increase by a total of almost seven percent from 2012 through 2015, says Freddie’s chief economist. Yet residential home values are forecast to rise about 23 percent over that same period.

FINANCIAL SECURITY

We’ve returned to the traditional pattern of house prices rising faster than inflation. Homeowners have watched their net worth grow over the years in part because of this dynamic. Paying off your home loan over time is another way owners cause their equity to increase.

Owners also aren’t subject to rising housing costs the way renters are. Anyone with a long-term mortgage knows their monthly payments won’t change as long as they own their home.

Higher personal incomes and an increased number of houses on the market since last fall have made it easier for prospective buyers. A drop in mortgage rates completed the conditions which in recent months have caused more households to begin shopping for homes.

A stronger home sales trend first appeared last fall. Sales rose from one month to the next and also were higher than in the previous year, according to the National Association of Realtors.

Remember that waiting to purchase could cause you to miss out on some terrific properties or pay more than you otherwise would need to. Once you know you can obtain financing on good terms, you shouldn’t hesitate to look for your next residence.

When Will Rates Rise?

Although we don’t know exactly when rate increases will appear, many observers expect them to start occurring in 2015. Continued job growth eventually will result in higher mortgage rates, say many economists.

We’re more likely to experience tighter financial conditions once there’s more evidence America’s economic expansion is healthy.

Already the Federal Reserve has stopped its aggressive practice of growing its portfolio with monthly bond purchases. Such actions have helped keep home loan rates low by boosting demand for bonds backed by mortgages.

Less official support for low rates suggests they’ll eventually rise. Especially since falling unemployment will create pressure to increase wages. A shortage of workers will force companies to pay more for the staff they need.

MORE JOBS

Unemployment reached ten percent in 2009, and now is below six percent. Federal Reserve economists believe wages will start rising once joblessness hits 5.5 percent.

Higher wages will boost inflation as firms raise prices to make up for larger payrolls. To slow down this spiral of higher prices, the Fed then is expected to increase the rate it charges for short-term lending to banks. Eventually that will temper economic activity by pushing up the cost of borrowing for both households and growing companies.

Borrowers Gain Bargains

Rates on home loans have been on a downward trend for much of the year, and that gives homebuyers extra incentive to purchase soon. Many experts have been surprised at the direction rates have moved in 2014.

            “It’s a temporary window of opportunity for buyers in that a year from now rates will be higher,” economist Mark Zandi told Bloomberg News. “I wouldn’t count on these low rates for very long.”

            Homebuyers taking advantage of current conditions will benefit from low rates for years. Someone purchasing today with a 30-year home loan can have the same monthly payments as long as they live there.

SAVE NOW

Borrowing costs rose last spring when investors became concerned the Federal Reserve was pulling away from its low-rate policies. But those fears proved to be unfounded in the months afterward, as purchases of mortgage-backed securities by the Fed dominated the market.

            High demand for mortgages from the central bank has encouraged rates to fall in recent months. Recently rates hit their lowest levels since 2013, notes mortgage investment firm Freddie Mac.

            Homeowners who would benefit from moving into a larger home or a neighborhood closer to family, activities or jobs should start looking at properties soon. 

Enhance Your Buying Power

It’s not surprising that many households hesitated to purchase real estate in recent years. Home values dropped after the housing crisis, and no one could be certain how far prices would fall.

But over the past year average prices have advanced substantially. Most areas report prices have increased by more than ten percent during the last twelve months. Consumers who have put off buying are moving ahead now.

Your first step in purchasing a great home is to discover your financing options. However, today’s borrowing rates aren’t low enough for some households to make the purchase they long for.

But an adjustable-rate mortgage (ARM) can help you live where you prefer. If you don’t plan on staying several decades in the house you’re purchasing, you don’t need to pay the higher rates found on 30-year mortgages.

Purchasing a home with an ARM immediately reduces your housing costs. That makes it easier for you to move into the home you want.

A number of ARMs are available today. Your housing costs may not change for up to a decade with an adjustable loan, so many owners move again before their ARM ever adjusts.

Rates Move Lower in 2014

Mortgage rates shifted higher almost a year ago, at a time when bond market investors thought the Federal Reserve was preparing to end its policies supporting low rates. But that anxiety has subsided, and rates have stabilized since then.

In fact, turmoil in the stock and currency markets earlier this year caused rates to drop. Investors across the world tend to buy U.S. Treasury bonds whenever concerns come to the forefront.

Worries about the economic stability of emerging market countries in recent months have encouraged investors to move into safer U.S. Treasuries. Greater demand for Treasury bonds results in lower rates.

That’s why rates have been falling this year for American homebuyers. Mortgage rates are directly tied to movements in the Treasury bond market.

TODAY’S OPPORTUNITY

It’s impossible to predict what the value of stocks or bonds will be in the future. We also can’t forecast how mortgage rates will move in coming months.

But we do know that rates have been kept at artificially-low levels for some time due to aggressive action by the Federal Reserve. As America’s economy regains momentum, these measures will be withdrawn and rates will naturally rise.

Policymakers use low rates to encourage economic activity. Companies are more likely to invest in new equipment when they can borrow on great terms. Consumers also start thinking about purchasing a home when they know they’ll benefit from affordable payments.

Rates will continue fluctuating, and it’s expected that stronger economic expansion in the future will reduce Fed activity. At that point rates will move to a higher plateau.

Sometimes we don’t realize how good things are until conditions have changed for the worse. Rates have been low for so long that it’s easy to overlook the positive reasons for buying real estate now.

But today you still have the opportunity to gain home financing at rates near all-time lows. And buying with a long-term mortgage lets you lock in current rates for as long as you live in your home.

Real Estate Opportunities Continue

                America’s unemployment rate should fall this year, according to recent forecasts. More job openings will allow our economy to grow faster in 2014 than it did last year.

                However, homebuyers will find mortgage rates have moved higher by the end of 2014. In coming months the Federal Reserve will cut back on measures it has taken to stabilize the economy in recent years.

                Yet rates still will remain at historically low levels. Home builders are responding by putting up new units to meet the demand – construction is expected to go up by around 25 percent this year.

                Buying real estate is a long-term commitment, and you shouldn’t let current conditions determine your actions. But it helps to know that today’s market is healthier than it’s been in years – and that affordable purchase opportunities continue to be available.

                America’s longer-term outlook is looking up, as well. Manufacturing is reviving and car sales are higher.

                Lower energy costs due to resource discoveries are helping both consumers and companies save money every day. If you also have an upbeat outlook on our future, it makes sense to seriously consider buying real estate soon.

Home Values Keep Rising

                Recent data from the S&P/Case-Shiller Home Price Indices reveals that national real estate values went up an average of 13.6 percent over the past year. Price gains have occurred for 17 months in a row, according to S&P/Case-Shiller officials.

                Buyers and sellers both benefit from a healthier market. Home purchasers can move ahead without needing to be concerned that prices haven’t reached bottom yet.

                More owners also want to sell now, since stronger prices boost their profits. Previously many homeowners who wished to sell stayed out of the market, since they wouldn’t break even on a transaction.

                Having more sellers gives buyers additional properties to select from. Real estate commentators say this additional inventory coming on the market will keep prices from spiking in the near future.

                Today’s market is getting back into balance, so that both buyers and sellers can make advantageous deals. “Most forecasts for home prices point to single-digit growth in 2014,” states S&P/Case-Shiller.

                Economists expect overall growth in the U.S. to expand this year, and interest rates to move up gradually. Purchasing soon gives you the opportunity to start living in a home that suits your current needs, while securing payments which fit your budget.

Your Affordable Home

                 Coming up with a budget before you buy a home lets you find a place to live that you’ll appreciate every day – and that doesn’t put undue stress on your finances. Calculating your monthly payments is a smart place to begin.

                 But you also should earmark funds for additional expenses such as property taxes, utilities and maintenance. Such costs are ongoing, so you’ll need to be prepared to pay them as long as you live in your home.

                To see how home payments will fit into your finances over time, it’s important to take into account how your overall expenses and income could modify in the future.

GOOD OPTIONS

                You may decide to buy with an adjustable-rate mortgage if you think your income will increase in the next few years, or that you’ll move again before your home loan resets. Having a financial plan lets you proceed confidently.

                Money matters also will affect the home and property you select. And understanding your homeownership priorities helps you navigate through a maze of tradeoffs.

                Is living in a particular neighborhood crucial to you? Or would you rather have a larger home a few miles away?

               Don’t forget that you’re choosing more than just a home when purchasing. Also think about how your living needs will change before you’re ready to move again, and look for a home which can accommodate those.

                Another common decision concerns how old you’d like a residence to be. Newer homes may be in less-established neighborhoods, and often require longer work commutes.

                Some buyers want a house that’s totally up-to-date, while others prefer renovating an older property. Shopping for real estate starts with knowing what you want.

Refi to Reduce Debt

Rising real estate values are increasing homeowners’ equity stakes. Your household wealth goes up just by living in your residence and paying your mortgage. Typically owners use that equity to generate a down payment on a move-up property purchase.

Another way to benefit from rising property values is to pay off other debts with a cash-out refinancing. You’ll accomplish this by taking out a new mortgage with a principal balance that’s larger than what you currently owe on your home.

You can reduce your total monthly debt cost by paying off high-rate credit cards. You’ll then have more funds to spend as you wish.

DISCIPLINED APPROACH

However, it’s important to use the funds produced with a cash-out refi to pay off debts. Spending home equity on non-essentials won’t provide you with any long-term benefits.

Even if you plan on moving in the near future, refinancing now could work to your advantage. Reducing your debts will improve your credit score – and that will let you obtain a lower rate when purchasing your next home.