Mortgage rates have steadily risen since the beginning of the year as signs showed the U.S. economy was growing, and the global economy had stabilized. A big part of the renewed optimism was the view that Europe was on the mend, and through selective austerity, the European Union would hold together and the status quo would survive. Well, what goes up comes back down, old is new again and Europe is back in the headlines. The focus now is Italy, and the election results last week showed that it may be a while before they find a true solution to the European economic crisis. In an upset of expectations, the biggest winner in the election was a comedian leading an anti-establishment party. The right and left wings split, and in Italys parliamentary system, it looks doubtful that anyone will be able to make alliances to form a working government. This is seen as a rejection of the austerity policies, and a big monkey wrench thrown into the gears of EU stability. The result in the markets was a rush to safety, and mortgage rates dropped to their lowest point of the year.
On the home front, the economic reports have been steadily improving, but congress is doing their best to keep things unsettled. When congress and President Obama came up with the idea of a sequester, automatic severe budget cuts that would hurt the priorities of both partys, it was put in place with the assumption that it would never come to pass. At the time, this was a way to kick the can further down the road and avoid making unpopular decisions. But in our dysfunctional system, no one seems willing to compromise, so as of Friday, the sequester is on. Despite all the dire predictions, the world hasnt ended. Yet. Most of the budget cuts wont go into effect for months yet, and there is still a chance that there will be a political work around. In the mean time, the next line in the sand is coming up as the government budget will need to be approved again by the end of the month, and congressional Republicans are getting excited about the possibility of shutting down the government if they dont get their way. The economy has been steadily improving, but this all makes you wonder where we would be if politics werent holding us back.
While congress does its best to stomp on the brake, Fed Chairman Bernanke continues to push on the accelerator. In testimony before congress this week, he stated that the Fed will continue its policy of buying back treasury and mortgage backed bonds in an effort to keep rates low. This policy has fueled the recovery and the Fed will continue this until the unemployment rate has dropped to 6%, which most experts say could be 2016. Knowing interest rates are likely to remain low has helped the housing market tremendously, and signs are that the economy will continue to grow this year.
If you are looking to buy a home soon, youve probably seen a change in the market. Listings are selling faster, inventory of homes for sale is tighter, and it is now common to see multiple offers so you are competing against other buyers when a contract comes together. Home prices are still low and with low interest rates homes are very affordable, but the market has shifted from a buyers advantage to a sellers advantage. This means more pressure on buyers, as the good properties are going fast. One thing you can do to make sure you are in the best position to buy, is to make sure you are pre-approved for a mortgage before you start looking for a home. This means knowing exactly what you can afford, and how much it will cost you, and making sure there wont be any problems that will keep you from closing on your home. A pre-approval starts with a quick, over the phone conversation. If you would like a rate quote, have any questions or want to go over your situation in depth, let me know how I can help.