Market Trends And Insights
Mortgage Rates Surge To 7-Year High After Fed Hike. Mortgage rates surged to their highest averages since 2011, following the Federal Reserve’s announcement that it was raising its benchmark interest rate by a quarter point. The 30-year fixed-rate mortgage jumped to 4.72% up from 4.65% the week prior. Last year at this time, the 30-year rate averaged 3.83 percent.
Why is this important considering rates are still at historically low numbers? Because buyer purchasing power decreases as rates rise. In other words, the amount of money a financial institution might lend decreases if all other variables remain constant. A quick rule of thumb is that for every 1% increase in the mortgage rate, a buyer’s purchasing power decreases by 10%. So, if a buyer’s maximum purchasing potential was $500,000 at 4 percent, it would decrease to $450,000 at a mortgage rate of 5%. Again, if all variables remain the same.
Will the rise in interest rates tame this robust home market? Not likely while demand for homes far exceed supply . And right now the Bridgewater market averaged 2.81 months supply of available homes over the past three months. Still a strong seller’s market. (See June and July Market Watch for detailed analysis)
The Wave of Millennial Homebuyers Continues To Swell. Millennials, those born in the 80’s to mid-90’s, have recently captured the attention of housing market watchers. I, too, have watched this group mature and provided my thoughts in my August Market Watch. The question surrounding this demographic is whether or not they believe in homeownership as part of their American Dream, or are they content with renting a place and living a more mobile and flexible lifestyle.
With millennials aging, having established careers, marrying and starting families, is the next logical step homeownership? The answer appears to be yes. A recent survey, Bank of America’s 2018 Homebuyer Insights Report, found that millennials value homeownership above nearly everything else, with 72% saying homeownership is their top priority. That is significantly above getting married (50%), having children (44%), and traveling the world (61%). The survey pointed out that millennials equate homeownership with personal and financial success. This demographic also feels that buying a home makes them feel mature, act like an adult and feel independent. All signals that this group is coming of age and ready to settle down into a more structured lifestyle. So, it would appear there will be a steady stream of buyers for years to come.
If you have questions regarding local market conditions, market values or what it takes to market your home, contact me. I would welcome the opportunity to meet with you and discuss your concerns and plans.
Al Fross is a Coldwell Banker Residential Brokerage Sales Associate based in the Bedminster/Bridgewater office. Al has lived in the Bradley Gardens section of Bridgewater since 1993 and has been an active volunteer in many recreational and community organizations including serving as a current member of Bridgewater’s Board of Adjustment and as past Chairman of the Township’s Planning Board. His knowledge of the Bridgewater and surrounding areas makes him the perfect “partner” when selling your existing property or buying your new home.