All year long we have been bemoaning the fact that there has
just not been enough inventory. Even though many markets have seen an increase
and it’s been an attractive time to sell, many sellers are hesitant to sell for
fear of not being able to find a new place to land. Purchasing their move up or
downsized home may prove tougher than they thought – there’s not enough to
choose from! Huh.
Lots of first time buyers are anxious to get in the market. The
continued existence of low interest rates has made a good platform for
affordable mortgages. The problem for these buyers is that they find themselves
up against other buyers competing for the very few homes for sale. In walks the
multiple offer situation. The sense of
urgency also keeps building as the Feds toy with the idea of raising interest
rates.
Analysts estimate that a full percentage point increase
affects approximately 250,000 new buyers. With pickings slim at the
current 4% rate for a 30 year mortgage, the scenario for a 5% rate would even
further decrease the already pathetic inventory. Those sellers looking to move
would be even more reluctant now that they could afford less.
Another change this year was the Private Mortgage Insurance, or PMI. If a buyer is not able to put in 20% or more as a down payment, the lender charges them PMI – which was about 1.35% of the loan amount. That dropped to .85% in 2015 - making the mortgage payment less. This could save the borrower about $2500 per year on a $500,000 loan. Nothing to sneeze at!