In the last few weeks this blog has discussed several reports that the residential housing market is in the midst of a strong recovery. In and around Worcester home prices are rising and with few houses for sale and many people looking to buy, sellers have been able to price their properties high and get favorable returns.
The trends in Worcester are happening across the country. CoreLogic, a company that produces information on the real estate market, reported that home prices are up more than 12% from last year all across the country and that only two states in the nation have not seen prices increase since last year. The company credits high demand and few foreclosures as the reasons for the national improvement.
However, the rising price of residential homes is not necessarily good news for people looking to buy. Most people who enter into real estate purchases require mortgages, or loans, to pay for their new properties.
Mortgage rates across the country have increased over the last two months due to the Federal Reserve chairman’s comments regarding the agency’s purchase of bonds. Current mortgage rates are a point higher than they were earlier this year, though experts do not believe that higher mortgage rates will stop people from buying homes.
Where buyers may face problems is in securing loans to buy their new homes. Higher mortgage rates increase the amount of money that a buyer will be responsible for repaying to its lender. Because real estate transactions often involve sales of property costing in the hundreds of thousands of dollars, lenders may become hesitant to make large loans to individuals who may not be able to keep up with their payments.
While increasing housing prices is a good sign for the national economy, buyers should be careful when deciding how much money they are willing to put toward a new home. Real estate transactions are complicated legal proceedings and buyers can lose a lot of hard earned income when sales fall through and lenders add conditions to their mortgages.
Source: The Telegram, “US home prices rise most in 7 years,” Christopher S. Rugaber, July 2, 2013