Let’s take a look at some of the latest national headlines and compare them to what is happening in the Minneapolis housing market to help us determine the outlook of the current national and local housing market, and at whether or not purchasing a home is a good decision.
Asking Prices Soar
According to this blog post on one of NAR’s websites, home sellers are listing their homes 2.5 percent higher nationally on a year over year basis. 74 percent of the largest metro areas posted an increase in asking price by 0.5 percent.
In Minneapolis, as pictured below, the Median Original List Price is up 2.7 percent on the Minneapolis Association of Realtors 12 month median year over year. This number falls right in line with the national average.
Foreclosures are significant because they can bring down the value of homes significantly, especially if they are concentrated in certain areas. In order for the housing market to sustain its recovery there must not be another wave of foreclosures.
In this blog post on NAR’s website, foreclosures were down from 75,000 to 57,000 foreclosures completed nationwide, that a decrease of about 24 percent.
When compared to the Minneapolis housing market, new listings for lender owned properties have fallen for two years in a row. They fell by 19.3 percent from 2010 to 2011 and 17.3 percent from 2011 to 2012, as pictured below.
If the housing market continues down this path, we are headed towards a housing market recovery in which home values and sales prices will continue to increase. I think a homebuyer in today’s housing market can feel fairly confident that their purchase will steadily increase in value over time.
Once a homebuyer has decided to enter into the market, it is time to start looking at mortgage rates and to determine just how much of a home they can afford to purchase.
We all know that mortgage rates are at historic lows, but to put it into perspective we will structure the purchase of a $150,000 on a 30 year FHA mortgage in Minnesota. The principle and interest payment for this home buyer with an interest rate of 3.250 percent comes out to be $671 a month with 3.5 percent for a down payment. Throw in taxes, insurance and FHA’s private mortgage insurance you are looking at a monthly payment of under $1,100.
Granted mortgage rates can get lower, but they can also increase and raise your monthly mortgage obligation. If you feel that now is a good time to purchase a home, don’t wait on a lower mortgage rate as home values increase outweighing the benefits of a lower mortgage rate.