Good news and good news

Castles in the Sand

It’s been a while since we had positive news about how the national real estate market was trending. The little black cloud hanging over the head of the market has included a shortage of inventory, first-time buyers being priced out of the market and raising interest rates. Well, we may be seeing the black cloud starting to turn a little grey.

A couple of weeks ago, the U.S. Census Bureau released homeownership figures for the fourth quarter of 2018. The level of homeownership increased to the highest level in five years from 64.2 percent to 64.8 percent. This may not seem like a significant change, but it is a positive indicator of the real estate market shifting back to ownership from renting. The U.S. Census Bureau further states that the U.S. added about 1.7 million owner households in 2018 and lost 167,000 renter households.

Economists are interpreting this as a small but positive movement in the market, in conjunction with lower interest rates and a slight leveling off of listing prices. This may be just the thing some younger and first-time buyers need to put them on the path to homeownership.

And what about interest rates, are they really a lot better? Well, it depends what you’re comparing them to. Taking a look at 2017 and 2018, it appears the low point was December 2017 when a 30-year fixed rate mortgage could be obtained for as little as 3.93 percent. After that, the rates started climbing during 2018 when in November of 2018, they reached 4.94 percent. Then rates started declining to pretty much where we are now in Florida of between 4.36 and 4.40 percent. It’s important to understand that all of the rates we’ve been experiencing during the past three years are all good and all staying below 5 percent, a number that some of us would have envied in past years.

Another interesting thing about interest rates is that all states are not created equal. Three things that have a big influence on the mortgage rates offered in individual states is the cost of doing business in the state, the amount of competition among local mortgage lenders and foreclosure regulations. A state that requires a longer and more expensive foreclosure process will surely have higher interest rates built in by lenders. And in case you’re interested, New York state currently has the highest mortgage rates and, believe it or not, California has the lowest.

However, none of these issues have as much influence on the mortgage rates offered as an individual’s credit score. The lowest rates always go to the applicants with the highest credit scores, so keeping your bills current is especially important if you’re thinking of applying for a mortgage or a refinance.

And for first-time mortgage holders, don’t be surprised if your mortgage is turned over to a “servicer” to administer the mortgage – that is, collect your escrow and pay your property taxes and possibly insurance premium on a schedule that benefits you. Also, it’s always a good idea to verify that these two payments are paid on time by the lender or the servicer before you get a notice from the county or insurance company.

For a while, homeownership was somewhat out of style, particularly after the housing bubble burst. Not only did younger buyers lose faith in homeownership, but they also couldn’t afford it and decided the homeownership lifestyle was maybe not for them. But apparently, the American Dream is alive and well. I think it just took a little nap.

More Castles in the Sand:

Are you smarter than a hedge fund manager?

House hunting – the fun and not so fun

Florida’s new foreign buyers