Sign up for Hawaii home remodeling tips

What’s Next For Home Prices And Mortgage Rates?

Jonathan Kutsmeda
CEO, Hawaii Mortgage Central

Have real estate prices peaked or can they climb higher? Will mortgage rates continue an upward trend from the two-year highs of this summer? Or are record lows due for a comeback? This week we look to provide some perspective on what to expect and how to make the most out of your real estate investment, whether you are in the market to buy or sell.

With a September decision by The Federal Reserve to continue the QE3 stimulus program, mortgage rates have moved slightly lower from summer highs. Despite this positive turn of events, rates are still very volatile as both stock and bond markets continue to be driven by speculation on the Fed’s next move instead of based on economic data.

It is our expectation that government stimulus will continue. In fact, we may see an increase in current monetary policies, which could accelerate the pace mortgage rates might improve.
What does this mean for the real estate market?

Lower mortgage rates have been critical to the recovery of the housing market. With lower rates comes a smaller payment, thus buyers can qualify for a larger mortgage and offer more for a property. As a result home values increase. In addition, multiple offers are competing for a short supply of homes in Hawaii. Low inventory, due in part to a recent moratorium on foreclosures, has helped bolster demand and put further upward pressure on prices.

The correlation between rates and home values isn’t guaranteed. Even with the potential for rates to climb higher, competition can still buoy the real estate market, although home affordability becomes a concern when prices continue to increase without wage growth. With income levels relatively unchanged, higher mortgage rates would make the current pace of appreciation unsustainable.

However, given the near term expectations for mortgage rates to decline, real estate should retain the gains of the last few years with potential for further moderate appreciation.

How can both a prospective buyer and a seller benefit?

In the short term, market conditions may continue to favor sellers as the increase in property values has helped many homeowners recover the equity lost during the last few years. These gains should not be taken lightly as they have been heavily influenced by unprecedented market intervention. Delayed fore-closures, suppressed home inventories, and record low interest rates have all played a key role in supporting the increase in home values. Any dramatic change in these factors could quickly reverse trends in favor of buyers, especially those with cash. If you’re a homeowner who is considering selling or has been waiting until home values recovered from the recession, it may be a good time to take action and capitalize on the current upward trend.

Despite some of the market conditions just mentioned, prospective buyers have good reason to start exploring options for home ownership today. A consistent argument for buying real estate in today’s market is appreciation. If home values continue to improve, you could be chasing rising prices over the next year. Although we expect the cost of real estate to increase moderately, buying into a stabilized market with an upward trend would mean securing a lower price now, and any additional gains in value would result in improved home equity.

If you are in the market to buy a home, how you structure your loan is the most critical step. Paying high closing costs for a rate that could be available for much less is a frequent mistake, especially for first time home buyers. A recommended strategy is to minimize loan costs when purchasing. This strengthens a borrower’s position to secure lower rates at a dramatically improved price via a future refinance. As an industry leader in market forecasting and the best-priced lender in Hawaii, we combine our market expertise with the best rates to successfully guide our clients with these strategies.

Hawaii Mortgage Central is a full service lender providing customized mortgage solutions at the best rates. As market volatility will likely continue, both sides of the transaction can benefit from our insight on market trends. Call 808-692-0692 today to create a loan strategy that not only fits your current goals, but best positions you for upcoming changes in the market.

Open House Guide
Mortgage Rates