Lets Talk Interest Rates, the Economy, and Rising Home Values
Sure, interest rates are slightly ticking up (REFIs will slow down a bit) but the U.S. economy is far from being out of the woods yet. Rates will not skyrocket anytime soon.
What if the economy turns the corner and interest rates climb even more?...The result will be rising home prices, which we're already starting to see....Guess what will happen with a better economy and rising home prices?:
1) 25 percent of borrowers are currently still "underwater", meaning they haven't been able to do a REFI. When property values rise guess what the folks that are no longer underwater are going to do??
2) When home prices rise, borrowers normally tap the equity through a home equity loan or line of credit to pay for other purchases.
The latest numbers from the National Association of Realtors show that existing home sales and prices are continuing to rise. In some markets, homes are being snapped up quickly, spending an average of less than 27 days on the market, according to a recent NAR report.
Mark Monson, a branch manager at lender Primary Residential Mortgage, thinks that over the next six months or so, the mortgage market will shift toward a purchase mortgage market for the first time in years. "About 50 percent of our business over the last two years has been refis, but in the last few months we've seen more purchases," he said.