Home prices nationwide increased year-over-year, according to a new CoreLogic report. From January of 2013 to January of 2014, home prices, including distressed home sales, increased by an average of 12 percent.
If you look at single-family sales in certain areas, appreciation is higher when distressed sales are included rather than excluded. You would think it would be the other way around, but it doesn’t quite work that way.
Reason being, home prices on distressed properties have increased so fast that they’re bumping up appreciation. That shows home prices, in general, may not be rising as much as people think. But it may not be just distressed properties affecting home prices and home sales.
Low temperatures and snowstorms can depress home sales. The weather has likely discouraged many people from house hunting, which impacts home sales and new construction. So some of the decline may be based on people not going to showings.
Mortgage Interest Rates
Another factor affecting home sales could be mortgage interest rates.
Mortgage interest rates are about one percent higher than they were a year ago for a 30-year fixed rate, and economists expect them to be over five percent by the end of 2014.
According to Trulia, an online residential real estate site, once mortgage interest rates reach five percent, it’s going to be cheaper to rent a home than buy. However, that doesn’t mean people shouldn’t buy once interest rates hit five percent. It just means that the rental property price will be cheaper than the buying price at that point in time.
Many realtors believe that the increase in mortgage interest rates is scaring away homebuyers, especially first time buyers in their late 20s and early 30s. I’m not sure if that’s the case, but it’s interesting to think about. Maybe everyone just needs to get used to the idea of higher mortgage interest rates?
WSB Radio’s Ilyce Glink Show – March 9, 2014
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