Looking back at the past five years, most borrowers, whether they were severely affected or only mildly so, can attest to the downturn in both the housing market and the mortgage industry. With such a sharp decline in these markets still fresh in the minds of many, homeowners and potential homebuyers remain exceedingly cautious; however, several signs have been manifesting suggest that 2013 will see a substantial amount of progress in the recovery efforts concerning the mortgage market. Although these signs provide no guarantee that total recovery is imminent, this article will explain each indicator of housing market improvement to show why now may be a beneficial time to purchase a home.
During the final quarter of 2012, the U.S. Bureau of Labor Statistics released a report that unemployment declined to a 7.8% rate, reaching the lowest average for any month since January 2009. Rick Sharga, executive vice president of Carrington Mortgage Holdings, LLC, sees this as a critical sign of housing improvement, arguing that with such a decrease in unemployment, home buying activity will consequently increase.
According to the National Association of Home Builders (NAHB), two recent trends, boosted builder confidence and prosperity of home construction, also provide critical indicators of housing strength. With the Housing Market Index (HMI), the NAHB measures builder confidence on a scale of 0-100 to determine the expectations of builders for the future of sales. In December 2012, the NAHB reported an HMI figure of 47, the peak level reached since April 2006. Given this rise in builder confidence, the NAHB predicts that single-family home construction will grow 21% from 2012 figures, anticipating a 16% growth in multi-family homes.
While increasing home prices may seem to discourage a greater amount of home purchasing activity, Sharga states that such upward motion for home prices could create a sense of urgency for potential homebuyers, thereby pushing purchases higher. Moreover, data shows that home prices are indeed increasing, with the National Association of Realtors (NAR) releasing a report that median home prices for existing properties grew 10.1% from November 2011 to November 2012.
While other factors exist that might still impeded prospective homebuyers, particularly the strict mortgage qualifications current being enforced, housing analysts’ estimates indicate that a higher amount of potential homebuyers will be active in the market during 2013.
When securing a loan, mortgage rates can mean the difference between saving and paying thousands of dollars over the lifetime of a loan. With rates hovering just above the historic lows that were set during fall 2013, many borrowers will be hoping to obtain home purchase loans to capitalize on such low rates.
However, the Mortgage Bankers Association (MBA) believes that rates will not stay at such lows for long; for the 30-year FRM, the MBA predicts a rise from the 3.60% rate on March 19 to 4.4% by the end of 2013. Such an increase in rates provides a greater incentive for borrowers to act fast and secure home purchase loans while they are low. As a result, home purchase activity is slated to rise this season, strengthening the overall housing market.
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