What can home buyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. A recent article at Bankrate.com notes some of the following trends taking shape in the housing market this spring:
1. Fierce competition.
Housing affordability is at record highs, due to falling home values and mortgage rates hovering near record lows. More buyers are taking notice and jumping off the sidelines. And mixed with sinking inventories of homes listed for sale, the competition is getting more fierce.
Investors are snapping up bargain prices, often in all-cash deals, which means greater competition for traditional home buyers too.
“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest,” says Jed Smith, managing director of quantitative research for the National Association of REALTORS®. Smith adds that first-time home buyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market.
2. More renters show desire to become home owners.
Recent surveys have shown that buying a home nowadays is more affordable than renting. As such, more renters are finding home ownership more enticing.
The signs are already starting to show: About 59.5 percent of tenants recently surveyed say they intend to renew their leases this year, which is the lowest rate since early 2009, according to a study by Kingsley Associates.
3. Mortgages may be a little pricier.
Fannie Mae, Freddie Mac, and the Federal Housing Administration recently have raised their loan fees, which means home buyers can expect to pay a little more for their mortgage this spring.
“Those who don’t have credit scores in the high 600s to low 700s may be forced to go the FHA route,” says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. “And they will be stuck with the higher fees.”
Buyers with smaller down payments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount.
Borrowers with higher mortgages can expect higher fees too. The FHA announced that in June it’ll increase its annual insurance for mortgages more than $625,500. “A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone,” Bankrate.com reports.