Yun expects average mortgage rates to jump past 5 percent by the end of 2016.
Chicago, IL (PRWEB) July 09, 2015
Lenders like The Federal Savings Bank read the latest National Association of Realtors (NAR) economic and forecast update on July 1st. Current economic conditions are conducive to further improvements in the real estate market.
Lawrence Yun, NAR's chief economist, discussed the improvement seen with the current economy and the impact this is having on the future of housing.
Consumer spending increases
Low gas prices have helped increase consumer expenditures. In fact, this type of spending rose at a 2.1 percent rate during the first quarter. Yun forecast 3 percent growth will take place in the second quarter.
A substantial chunk of money was spent on household items such as furnishings and equipment. Household purchases have grown 6 percent the last two consecutive quarters. This strong growth in sales is likely due to the recovering housing sector.
According to a press release from the U.S. Department of Commerce on April 1st, construction spending was at $1,035.8 billion annual rate in May 2015. This is 0.8 percent higher when compared to the revised April estimate and 8.2 percent higher than the estimate from a year ago at this time.
According to the NAR's released economic and forecast update, housing permits used to construct new homes jumped to an eight-year high. In fact, Yun anticipates builders will construct 1.1 million more houses in 2015 and 1.4 million additional residential structures in 2016. These increases will occur to relieve the housing shortage which drives up the values of homes.
The Federal Savings Bank thinks higher construction spending is likely due to a higher demand for housing and a stronger real estate market. The current level of available inventory does not meet the needs of interested buyers looking for new homes to invest in.
Yun indicated strong demand for housing led to a stronger price growth for homes.
A jump in construction spending will help normalize home values and bolster the market.
Existing home sales hit a high
During the month of May, total existing-home sales jumped to their highest level since 2009. More first-time home buyers are making the move to become homeowners and it is driving up healthy housing market activity.
These younger buyers investing in properties make up 32 percent of all individuals purchasing homes. This is 3 percentage points above the number of first-time buyers from a year ago. Yun indicated lower fees on FHA loans might be driving the increase.
Mortgage rates rise, but remain historically low
Mortgage rates have increased due to events taking place overseas as well as an improving domestic economy. As rates continue to rise, buyers might feel more inclined to make their moves now and secure a lower mortgage rate before interest increases. Yun expects average mortgage rates to jump past 5 percent by the end of 2016.
According to the update Yun provided, the housing market will continue to improve. Homes sales and prices will likely continue to rise. In addition, revenue for the industry will also jump as the market strengthens.
Contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.