Rates Drop as Spring Home Buying Season Begins

By Chuck Biskobing

When we launched our blog, we promised we’d scour the headlines to curate valuable and relevant news in the real estate world. Today we give you the first in a series of expert commentaries penned by our own Chuck Biskobing, attorney and trend watcher. Chuck’s occasional blog series will be an ongoing opportunity for him to interpret the real estate climate. We invite you to contact Chuck (or any of us) to share in the discussion.

For much of last year we saw rates increase while home prices continued to climb which edged many buyers from the market. Indicators are that 2019 is shaping up to be more favorable for buyers and may be a great time to buy because rates are dropping and more homes are being listed for sale.

High mortgage rates coupled with higher prices were a big problem for home buyers over the past year. According to the Federal Reserve, median home prices have risen nearly 50% since 2010. Many of these gains have come at a time of historically low interest rates. Low rates meant buyers could afford to pay more, since their payment would still be reasonable.

2018’s Higher Rates Spurred Bidding Wars

Increasing rates in 2018, on top of already high prices, meant that something had to give. To keep mortgage costs affordable, buyers either had to come up with more money down or buy a cheaper house.

Here in Atlanta, and in many other cities, that meant bidding wars on any home that was priced well for the area. Stories of 20+ bids on a home were not uncommon, and any true deals were quickly snatched up by cash buyers. When rates started to rise last year, some buyers simply gave up. Few homes that they could afford were available, and the competition for those homes was tight. 2019 is shaping up to be different.

Throughout 2018 we saw a rise in mortgage rates from around 4% at the start of the year to roughly 5% at the end. For the average mortgage, this higher rate translates to about $150 a month increase in payment. For many, that difference was significant and meant they were priced out of the market.

Feds Signal Holding Rates in 2019

On March 20th, the Federal Reserve signaled its intent to keep rates steady for the rest of this year. U.S. Treasury rates immediately fell, and mortgage rates followed them down shortly thereafter. At the time of this writing, the average 30-year mortgage rate is right around 4.2%. That’s a rate not seen since February of 2018, and it means borrower mortgage costs should be dropping relative to last year. Many observers believe that for the foreseeable future these low rates are here to stay. Recent data also suggests home price gains may be abating.

According to the S&P Case-Shiller Home Price Index, home price gains nationwide have slowed to the lowest level in four years. Some cities are even seeing price drops. Recent slowing of price gains may be due to an increase in inventory available for sale. For the past year and a half, Saint Louis Federal Reserve data has shown a more or less continual increase in the number of homes available for sale. The supply has increased despite mixed home builder sentiment and new housing starts numbers.

Price Leveling is Good News for Buyers

Whatever the cause, leveling off of prices is good for buyers. More available homes coupled with drops in mortgage rates to levels not seen in over a year mean affordability should be increasing.

While I don’t want to say it’s a full-on buyers’ market yet, in many areas buyers may be able to avoid bidding wars which only tend to inflate prices. With more homes available and lower mortgage rates, this spring may be the right time for sidelined buyers to jump back into the market.

Chuck Biskobing, associate attorney at Cook & James, devours information and distills research from his work as a closing attorney and personal interactions with builders, agents, loan officers and other industry insiders. He’s licensed in Georgia, South Carolina, North Carolina and Connecticut and has participated in more than 5,000 real estate closings. To counter all the geeky screen time and paper work required to stay current on the real estate climate, laws, news and industry trends, Chuck is an avid outdoor adventurist who has hiked Mt. Kilimanjaro, scuba dived in Zanzibar and once took a five-month hiatus to hike the entire 2,189 miles of the Appalachian Trail.