After the first month of 2015, it looked like this year would be similar to 2014. However, the market shifted with greater buyer demand during the past month.
Home buyer demand increased by 566 pending sales in the past two weeks and now totals 2,619. This two week surge was the largest increase since February 2012. Last year at this time demand was at 2,381 pending sales, 9% fewer than today. As a result of the rapid increase in demand, the expected market time dropped to 62 days from 78 just two weeks ago, pushing housing deeper into a seller’s market.
Something changed, and the big difference is cheaper money in the form of low interest rates. Low interest rates are fueling housing demand and, as a direct result, the Orange County housing market has blasted off.
Today’s rates are a half a point cheaper than a year ago. For a jumbo conforming loan, loans between $417,001 and 625,500, rates are at 4% versus 4.5% a year ago. For the median priced home in December 2014, $591,000, and a 20% down payment, a buyer is looking at a monthly mortgage of $2,257 at today’s rate, versus $2,396 at 4.5%. That’s a savings of $139 per month, nearly $1,700 per year, or $50,000 over the 30-year term.
Buyers are making wise choices to pull the trigger now – to buy now because rates are cheap and are down to historical lows.
Current home loan interest rates are low, because they have been artificially pushed down by the Federal Reserve for years. The Federal Fund rate has been kept at nearly zero since December 2008. They have hinted at raising these rates. When short term rate increases, long term rates, home mortgages, will soon follow.
Prior to the recession of 2007 to 2009, mortgage rates were about 6.5%. For the December median sales price home, that’s an extra $731 per month every single month. In 2000, rates were at 8%, or an extra $1,212 per month. In 1990, rates were at 10%, and in 1981 they reached 18%.
Today’s rates are unbelievably low – and smart buyers will take advantage of this gift compliments of the U.S. government.
It’s likely that the FED will keep rates in the low to mid-five-percent range within the next couple of years. That difference in monthly payments will put a dent in buyers’ pocketbooks and their monthly budgets. Cashing in on low rates today means more disposable income.
Many Orange County CA buyers will continue to look to pay the Fair Market Value for a home this year. From the official start of spring at the end of March, through the start of summer at the end of June, more homes will come on the market than any other season. Home selling success will be determined by value and correct seller pricing.
By Harrison K. Long, professional real estate representative, Realtor, real estate broker, and professional real estate representative at Orange County CA. Source of some information is ReportsOnHousing.com and CRMLS multiple listing service.
Professional real estate agent and broker representation – with help for property owners, home sellers, private trust estate representatives, estate administrators, executors and heirs, probate and trust attorneys, estate planners, income tax professionals, public guardians, fiduciaries, investor group managers, bankers, and individuals, with listing and sale of properties at Orange County, CA. Contact us at 949-854-7747 with your questions about home prices and values at Orange County CA cities and areas with Home Selling and Real Estate market updates.
“Orange County CA Housing Demand blasts off.”