Bloomberg News reported that average interest rates on fixed mortgages officially decreased for the fifth week in a row.
Mortgage Interest rates were expected by many economists and housing market experts to soar at this time due to the Federal Reserve’s scale back of the $85 billion per month stimulus plan that it began participating in at the beginning of 2014. This stimulus plan kept interest rates artificially low since 2011. However, now that the plan has been sliced, there are new influences on the astonishingly low rates.
A factor that plays into the pattern observed in interest rates at the moment is the instability in the Ukraine. When there is uncertainty about foreign investments, investors seek stable, sound assets such as mortgage-backed securities at home. The volatility of the Ukranian market right now has leveraged demand for investments including mortgage-backed securities, which in turn has driven down the interest rates.
Currently, the housing market needs all the help that it can get. While low interest rates are enticing to home buyers, the value of homes has increased significantly, decreasing homebuyer affordability and thus pricing many out of the market. National Mortgage Professional reports that median home prices nationwide increased to their highest level since December of 2008. For homebuyers who can find the right home at a decent price, low interest rates have created both an unexpected and a rare opportunity in this market, but a low-reasonably priced home is difficult to swing.
According to data from the National Association of Realtors, higher priced homes are increasing in sales, but the medium-lower priced homes are not. The National Association of Realtors contains, “Purchases costing $1 million or more rose 7.8 percent in March from a year earlier… Transactions for $250,000 or less, which represent almost two-thirds of the market, plunged 12 percent in the period”. The present pattern of the housing market is shifting home ownership to a luxury rather than a commodity.