Home prices, mortgage rates, lending standards and home buying trends are shifting. This is what service members need to know about buying a home in 2014.
Insight into these four economic and market factors may help potential homebuyers turn their American Dream into a reality.
1. Home Prices are on the Rise
FHFA House Price Index of third quarter 2013 shows prices have been on a steady climb since Q2 2011. Many forecasters believe the upward trend will continue. Those who buy a home in 2014 may stand to gain more than just the title of homeowner. Up 8.4% nationally from Q3 2012 to Q3 2013, increasing home prices are triggering a mixed reaction from consumers. Some have sticker shock while others see the potential for a return on their investment in the form of future equity.
2. Mortgage Rates May be Going Up
According to Freddie Mac's weekly composite mortgage interest rate report archives, average mortgage rates have increased more than one percentage point from December 2012 to December 2013. Many economists and individuals involved in the industry believe that the Fed's plan is still on track to cut Treasury and Mortgage bond purchases significantly for 2014. Since interest rates follow the bond market closely, interest rates are predicted to stay the same or increase, but no significant decrease is foreseen.
"Folks waiting for rates to drop may be waiting a long time," shares Tim Lewis, Veterans First ® Special Projects Director and U.S. Army Veteran. "In the historical scheme of things, rates are still very low."
3. New Mortgage Qualifying Rules Protect Borrowers
A number of new federal regulations have recently come into effect. These regulations are designed to protect borrowers and the mortgage market. However, to many borrowers, the new mortgage regulations may seem like the lending belt is tightening. Throw rising home prices and rising interest rates into the mix and consumers may decide to think long and hard before buying a house. Actually, VA mortgages already qualify under some of these rules, so changes will most likely not affect VA borrowers as much as others.
4. Homeownership Rate Has Dropped
According to the Census Bureau, homeownership in the U.S. has hit a 15-year low. After the mortgage crisis in 2008, lending standards got tougher. As a result, many turned to renting. In today's market, there may be more supply than demand in some areas. This could be a good thing for buyers who don't want to get into bidding wars to get the house they want.
These four factors may make 2014 a great year to buy a house for many VA-eligible borrowers. For more on the VA home loan process or how to use your benefit, contact an experienced VA lender.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender