New Home Sales Rise as Rates Drop
New home sales have risen as mortgage rates drop continuously, according to recent reports. While other parts of the economy continue their chill, demand for new U.S. homes was on the rise in May for the second straight month as mortgage rates dropped. This has bolstered the residential real-estate market, which of course had been stagnant (or worse) since the worldwide financial collapse of 2008.
Falling borrowing costs and more affordable properties may keep luring buyers, even as a cooling job market and limited access to credit restrain the economy’s recovery. Much of the credit for this news is owed to the Federal Reserve, which last week extended a program to keep long-term interest rates low with the goal of reducing unemployment, sustaining new home sales, and preventing a global slowdown from stalling financial expansion.
The article states: “Sales climbed to a 346,000 annual rate, up 0.9 percent from a 343,000 pace in April, according to the median forecast of 56 economists surveyed by Bloomberg News. Data last week showed builders broke ground on more single-family houses last month and industry confidence climbed in June to a five-year high. “While fears of an economic slowdown have mounted in recent weeks, the U.S. housing market has shown signs of an accelerated rebound,” Joseph Carson, director of global economic research at AllianceBernstein LP in New York, said in a June 22 note to clients. “Positive trends in housing starts and prices indicate that a budding recovery is under way, which may get further support from new monetary stimulus by the Fed.”
There are a number of things you can do to take advantage of the recent mortgage rates drop:
- Consider Recent Changes to a Fixed Rate Mortgages: The lowest mortgage rates are no longer found in 30 year mortgages. More options are available for financing housing and among these are fixed mortgages from 15, 20, to 30 years. To get the lowest mortgage rates from lenders you could try refinancing to a shorter term to lower your monthly payments. If that proves difficult, try to alter an adjustable rate loan to a fixed rate.
- Get a Home Equity Loans: A home equity loan is a type of loan in which you use the equity in your home as collateral. Home equity loans are often used to finance major expenses such as home repairs, medical bills, or college education. A home equity loan reduces actual home equity by creating a lien against the borrower’s house. If interest rates are really low, then it may be best for you to take out your own home equity loan.
- Look into an Adjustable Rate: Federal rates affect the changes in an adjustable mortgage rate. The most optimal time to get an ARM is if you have no plans of staying for long in the house where you currently reside. If you already have an ARM, and you intend to stay put in your house for some time, it is critical for you to get your loan at today’s lower but fixed rates.
- Refinance: Refinancing can do a number of things for you. Most importantly, it can lower your interest rate, monthly payments, and the amount you will ultimately owe on your home.
These remarkably low mortgage rates create an excellent opportunity for those looking to begin or continue the American dream of home-ownership. If rates drop further in the coming months, look for new home sales to continue to rise.
However, this trend cannot continue forever; the pendulum may soon swing back toward higher mortgage rates as more people are attracted back into the real estate market. For more information about mortgages, refinancing, home equity loans and more, check out Chicago Mortgage Spot today.