It’s been quite a banner year for real estate and mortgages in Orange County. It’s been a squeeze to get into this HOT market for sure. For the first time since 2007, we have seen record sales and prices. I can remember, back in 2007, prices being this high and rates basically hovering around the same rate. I remember saying to myself, “how can this momentum maintain itself? How can the economy sustain this growth?”
For one, this is a different market than 2007. We are seeing a much stronger job market. Unemployment is sitting around three percent. Buyer confidence is up, while rates are relatively low. The serious lack of inventory is another reason for price increases. We have seen prices continue to increase slowly and steadily for 10-plus years. Just this past year, we have seen an increase of six percent in home sales, while the median home price for OC reached heights of $650,000. This hasn’t happened since 2006 and 2007, and forecasters are predicting another increase of 5-6 percent this upcoming year, as long as rates don’t increase too much. If that’s the case, these predictions could be spot on.
With that being said, the prime rate has recently moved up to five percent. The 10-year bond yield, which is the bellwether for mortgage rates, is sitting around 2.8 to 3 percent. The prediction is that we will see an uptick in rates over the next 6-12 months, with all eyes being focused on inflation -- which is another reason to get into the housing market now while it’s still an opportune time.
New mortgage guidelines will play a major roll this year in the housing market. A few changes happening now are:
-Expanded guidelines allowing for a higher DTI (debt to income) ratio;
-Lower down payment allowed for high-balance loans;
- Minimal documentation for qualifying.
This is a sign that banks are willing to take on more risk, knowing the economy is maintaining, moving forward, and not going backwards.
A year ago at this time, the mortgage averaged 3.25-3.5 percent. Rates for a 30-year fixed rate loan under $453,100 are 4.6 percent, with an average 0.5 percent point, down from the previous 4.75 percent average. The 15-year loan rate average is 4 percent, down from 4.25 percent.
Inventory -- or rather, lack of inventory -- will be the biggest factor this summer. We need homes for buyers to buy. Having such a shortage of quality homes is playing a big part in this real estate market. Home buyers can’t buy homes if there is no inventory. If you’re thinking of buying, act fast, be prepared, and pre-approved. That way you can move on the right home when it becomes available. Get your 2016-17 income information ready, with proof of funds, so you’re prepared to meet with your lender. Consult with your local realtor to keep up with the moving market. Don’t procrastinate, otherwise someone who is ready will beat you to the punch!
It’s a HOT market!