TWiRP – December 19, 2015

Most experts agree- the U.S. housing market still has tons of opportunities for home buyers… but those opportunities won’t last forever. Especially with the rate increase announced by the Fed this week, it makes more sense to buy now rather than continue renting and miss out on more growth.


The Housing Market Hasn’t Peaked Yet

Despite what your uncle may have told you, the market still hasn’t reached its peak. Home prices are still 19% lower than before the recession. At the 5% growth rate we’ve seen over the last few years, home values won’t return to their pre-recession highs until the summer of 2017.

Housing markets are hot across the U.S. due to low interest rates and a healthy economy. If you’re renting right now, you’re throwing away money because until the interest rates go up, borrowing the money to purchase a home is cheap.


Almost Zero Chance of a Market Downturn

According to the Nationwide Economics Health of Housing report, the housing market is very healthy right now, and it’s extremely unlikely to experience a downturn in 2016. This is primarily due to low unemployment numbers, which have decreased in 90% of the country’s metro areas in the last year. Moreover, the fundamental stats used to analyze the housing market shows the strongest numbers in the last 10 years.

The report also indicated Nationwide’s Leading Index of Healthy Housing Markets (LIHHM) to help indicate the market’s health. It shows a national value of 108.2 for Q4 2015, which is a great score.


Credit Lenders Expect to See Credit Standards Lower in 2016

During the recession, it was nearly impossible to get a decent mortgage without a lot of cash in the bank and good credit. The standards have eased quite a bit since then, but most lenders expect the trend to continue next year.

Fannie Mae conducted a Mortgage Lender Sentiment Survey for 2015, and the vast majority of lenders think the standards will ease. One major reason is the difficulty some first-time home buyers are experiencing right now. Home affordability in 2016 is expected to be more difficult for everyone though, due to increasing mortgage rates and home values.

Federal Reserve Hikes Interest Rates

Prior to Wednesday, the interest rate range was from 0.0% to 0.25%. As of Wednesday, that changed to 0.25% to 0.50%. That isn’t a major change, but it will still affect millions of home buyers and investors. The hike wasn’t unexpected, as almost everyone agrees that the economy is the best it’s been since the recession.

During her interview, Federal chief Janet Yellen stated “there are pressures on some sectors of the economy, particularly manufacturing, and the energy sector…but the underlying health of the U.S. economy I consider to be quite sound.”

Many also expect that even though this is the first rate hike in almost 10 years, there are more to come in 2016.


Global Stocks Rise with the Federal Reserve Rate

After the announcement of the interest rate hike, stocks around the world surged. Investors were happy to finally see an end to the uncertainty of what would happen next. The Fed had announced a rate hike would likely happen sometime this year, so having the number out in the open helped many sign with relief.

Unfortunately, the news isn’t as good for home buyers. Higher rates from the Fed will likely lead to higher mortgage rates next year. One report estimated that 7% of families that bought their first homes this year would be unable to afford the same home next year with the higher rates expected.


Steps to Buying Your First Rental Property

Given the expected in mortgage rates increase in 2016, now may be the best opportunity to get started in real estate investing. Before you get started, there are a few steps to follow to make sure it’s the best move:

  1. Plan, plan, plan
  2. Make sure the numbers work
  3. Sort your finances
  4. Negotiate on price
  5. Get to know local real estate agents



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Justin Stowe

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By Justin Stowe

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