Time will tell what the ultimate result of “Brexit” will be, but for now we know the cost to borrow money for a new home has fallen.
As of July 1, the 30 year fixed-rate mortgage averaged 3.48%, only 17 basis points (or .17%) from it’s all time low of 3.31% in November of 2012. #greatnowbringback2012prices
Furthermore, 15 year mortgage rates averaged 2.78%, dropping from 3.24% a year ago; 5 year hybrid adjustable rate mortgages averaged 2.70%, down from 2.99% a year ago.
What does this mean? In our opinion it’s good and bad. Low interest rate environments allow homeowners to keep payments low but also cause prices to inflate. The combination of low rates and tighter than normal supply means prices will only keep rising in the short term. When it comes to new construction, inflation also “infects” land & building materials costs which only pushes your retail prices higher. Unfortunately home builders don’t (always) build for charity, so rising costs are pushed on to you – the homeowner.
If prices keep rising at the current pace and wages stay stagnant what does this mean for future homeowners trying to get into the market? It’s going to be harder. I wish we knew what was to come. Maybe with high prices will come longer term mortgages (can you say 40 or 50 year terms!?) or fancy adjustable rate programs….but we all know what those programs led us to back in 2008.
All we know in the short term is the longer you push buying or building down the road, the more you’ll pay. In the meantime Jeff & Lou are working on that time machine to bring our buyers back to 2009 and start buying every piece of real estate under the sun. Stay tuned…
Lou Bitove & Jeff Bortnick, owners of The New Home Experts®, have more than 30 years combined experience in real estate, much of that with builders like Pulte & Toll Brothers. They also provide market research for area builders, developers and national firms. If you’re considering a new home, remember: the builders rep represents the builder, not you. Work with the only local agents in Metro Detroit to specialize in new homes, and save money in the process – ask us how!