2015 marked the best overall year for homeowners since 2007 thanks to steady demand, attractive interest rates, and a healthy Utah job market. Looking ahead to 2016, here is a quick outlook on 3 things I anticipate to occur.
Interest rates will rise.
From news outlets, leading economists, to real estate blogs, rates are forecasted to be closer to 5% by years end.
Rental rates will continue to increase.
Low rental vacancies, lack of new construction rentals, and difficulty to save sufficient down payment to purchase a home will continue to drive rents upwards.
Millennials, millennials, millennials.
These ’35 and unders’ just surpassed baby boomers as the largest demographic. You’ll hear more and more about ’em as they move out and move into homeownership.
My phone was buzzing with questions from clients wondering if mortgage rates would be impacted from the Federal Reserve’s decision to raise the key fund rate. “If only I had a crystal ball,” was what I found myself saying.
It’s important to note that home mortgage rates are not directly tied to the Federal Fund Rate. Revolving lines of credit, on the other hand (think: home equity loans or credit cards) are more closely related. Mortgage rates follow bond yields, specifically the 10-year treasury.
While I don’t have that crystal ball, analysts and economists from organizations like the Mortgage Bankers Association or government-sponsored funders like Fannie or Freddie are predicting that mortgage rates may increase gradually over the next year. Take a peek at the chart below for what they’re predicting.
FHA Loan Limits Increase
Also this month, the Federal Housing Administration (FHA) increased FHA loan limits to both counties Utah and Salt Lake County. The FHA loan limit for Salt Lake County is now $312,800 (up from $304,750) while Utah County is $303,600 (up from $293,250).
My take: There’s no need to hit the panic button; in the big historical picture, mortgage rates are still very low. However, if you believe the predictions, then now is the time to buy and you’ll only pay more interest the longer you wait. We had also hoped the FHA limit changes would be more substantial, but there are still many homes available that fall in those guidelines, and can be had for minimal down payment.