While interest rates have shot up since the end of the election and are predicted to rise even further, 2017 will still be a great year to buy a home, and today I want to tell you why.
Since the election was decided, interest rates have shot up, and many of you have been wondering how that’s going to affect the housing market next year. Today I’ve brought in Dave Brown, Vice President of Catalyst Lending, to help explain in detail what we can expect to see.
The good news is that, according to Dave, our market is strong enough to bear this higher rate. Rates will probably continue to increase slightly, but there are a couple strategies a good Realtor and a good lender can help you implement to mitigate this effect.
First of all, a lot of people don’t realize that instead of getting a reduction on a sales price, you can take those same dollars and use them to buy down the interest rate. That will actually have a much greater impact on keeping the payments low than a reduction in the sale price.
The other strategy is using an adjustable rate mortgage, such as a 7/1 ARM. The average term that people keep their loan is seven years, so why pay for a 30-year fixed rate if you’re not going to keep it for all 30 years? 7/1 ARM rates today are right about where the fixed rates were prior to the election. Speaking from experience, I have an adjustable rate loan from the 80's and 90's until I switched to a fixed rate in 2004. Dave himself has never had a fixed rate mortgage on any of his homes or investment properties.
Lastly, the Mortgage Bankers Association has predicted that we’re actually going to see more purchase transactions in 2017 than we did in 2016. In Dave’s opinion, 2017 is going to be a great year to buy.
If you have any questions, please feel free to give me a call or shoot me an email. Until next time, we wish you a very merry Christmas and a happy New Year.
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