The home-buying season has arrived and the 2013 real estate market seems to be moving a little faster, while mortgage rates are still lower than ever. You might be wondering if mortgage rates are going to hold steady, increase, or decrease, considering the fact that they have gone up since the historic lows recorded last year.
While the economic growth seemed to slow down considerably at the end of 2012, it looks like it came back on the right track at the beginning of this year. In an economy that is fueled by consumer spending, people keeping their job is of the utmost importance, so the recent layoffs decrease has helped significantly as well. The real estate market has contributed to the economic recovery also. Existing home sales have gone up as well as new home construction, but the inventories are fairly low because the construction industry is also in recovery.
What Influences Mortgage Rates?
Back in November of 2012, mortgage rates were 3.31% for a 30-year fixed-rate mortgage and have increased to 3.51% by February 2013. Even with the slight increase, mortgage rates are still close to record lows, and actually lower than they were at this time last year.
One of the main factors that influence mortgage rates is the housing market recovery, which has suffered significantly due to the economic crisis of 2008. Home sales are rising, but the inventories are getting lower, which will drive home prices up. Builders are also slowly recovering, so more and more new homes will become available. All of these contribute to the appreciation of the housing market.
The United States economy, which is seeing slow recovery, has the most influence on the housing market. After the recent recession, economists expected a 3 to 5 percent growth in Gross Domestic Product (GDP), but the United States is only experiencing a 2 percent growth. The recovery is slow but steady and will lead to a stronger housing market.
Will Mortgage Rates Go Up or Down in 2013?
Excluding another major crisis, a new war, or the further deterioration of the European economy, it is safe to say that the mortgage rates will slowly rise in 2013. The economic increase will lead to an increase in corporate profits, which will positively influence confidence among consumers and potential home buyers. As a result, the demand for stocks will increase, the demand for bonds will decrease, and mortgage rates will go up.
The mortgage rates will most likely remain under 4 percent for 2013, but gain up to 0.5 percent by the end of the year. If the economy continues to grow, you should expect higher mortgage rates in the future, but if there is a new financial or political crisis, the rates will go down to what they were in 2012, and possibly even lower.