What we have been predicting is starting to happen:
Interest rates continue to bounce between 5% - 5.5% for 30-year fixed mortgages. The Fed bought $12 billion worth of Mortgage Backed Securities in the week ending 1/20. As they wind down their purchases, as they have announced they intend to do, it is likely that upward pressure on rates will increase.
To build capital and reduce risk, the FHA announced that it will raise insurance rates and tighten credit score requirements, including increasing upfront premiums from 1.75% to 2.25%, reducing the maximum seller contribution from 6% to 3%, and increasing the level of FICO scores from 500 to 580 below which a down payment of 10% is required. The expected timing of the upfront premium increase will be in the spring, and the other changes will take place later over the summer.
Housing Inventory is shrinking as San Antonio continues to thrive and add new jobs. San Antonio is a GREAT place to live! New Home starts are lower due to the difficulty Builders are having in borrowing money for lot development. That means that existing homes may get more expensive.
So, what does this mean?
1. If you are (or know) a First-Time Home Buyer,
- It will be harder to qualify for a loan if you wait,
- The interest rate may be higher, you will need more cash at closing, and
- Your initial equity will be less due to the increased upfront premium (which is normally rolled into the mortgage loan).
Remember, a 1/2% change in interest rate has the same effect on your payment as a 5.87% change in the home price.
2. If you are a Move-Up (or Down) Buyer, the above will also apply to you, plus it may become more difficult to sell your existing home. Remember, even if you don't get every penny you wanted from the sale of your existing home, the money you save on your larger home will more than compensate for that. The difference between the two is what counts.
3. Traditionally, the Housing Market heats up in the Spring and runs full-steam through Labor Day. If you are thinking about Selling your home, NOW is the time to get it on the market, before those things happen.
Remember, both TAX CREDITS expire on April 30. We think it is unlikely that they will be extended again. To take advantage, a home must be under contract by April 30 and close prior to July 1. Those Credits are up to $8,000 for First-Time Buyers and up to $6,500 for Move-Up (Down) Buyers. "First-Time" means you haven't owned a home in the last three years. "Move-up (Down)" means you have owned a home for at least five of the last 8 years. There are income limits and other limitations. Contact us if you want to see if you or someone you love might qualify. These are both refundable TAX CREDITS - that means that they first apply to any tax you owe, and the balance is refunded to you - TAX FREE CASH.
Wondering about Home Values in Your Neighborhood? If you are in the Greater San Antonio area, we will be happy to send you a FREE Market Snapshot which shows you ALL homes in your neighborhood which are for Sale now or have sold within the last three months. If you need a more thorough Professional Home Value Analysis, we'll be happy to provide one without obligation. If you are not in our market area, contact us for the name af a superb REALTOR in your area.
Ellen & Doc Stephens, REALTORS®
Keller Williams Realty
San Antonio, TX 78230