In my previous blog post, I discussed how home prices were outpacing the average US wage. A short housing supply and an ever-increasing demand for home purchases seemed to be the catalyst for all this. This week we received more data to confirm this general market trend.
Applications for mortgages jumped 4.8 percent last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted report. This happened as interest rates rose again last week!
So… consumers don’t care their wages are lagging behind home prices and don’t even care that interest rates are rising on top of that. A Redfin survey conducted last month found that even if interest rates rose above 5 percent, only 6 percent of prospective home buyers would walk away from their plans to buy a home. "Mortgage rates are still really cheap compared to the historical average. Over the last 50 years or so mortgage rates have averaged around 8 percent on the 30-year fixed rate mortgage, and have been much higher, topping 18 percent in the 1980s. Rates now are still below 5 percent," Redfin chief economist Nela Richardson stated in an interview.
Richardson made a good point, we still have relatively low interest rates in the grand scheme of things and her input makes me believe we will see interest rates continue to go up in the next coming years. From a personal perspective, this makes me inclined to try and buy a house as soon as possible. Interest rates are still low, the majority of the Millennial generation is still renting, and the supply of housing is not dangerously low. On top of all this, we can’t forget one simple fact about the world we live in… the ever-growing population:
Hope you have a good day,
Photo by Paul Skorupskas on Unsplash
Chart from Environmental Impact Statement website
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.