What's that Sizzle? It's the 2017 Homebuying Season.
If the new data put out by the Mortgage Bankers Association (MBA)'s Builder Application Survey tells a story, it's this: The Spring homebuying season is off to a hot start. How hot? A whopping 16 percent.
Compared to January of this year, February saw a 16 percent jump in mortgage applications for new homes, rising from 44,000 to 51,000 on an estimated unadjusted basis. That's nothing to sneeze at and sets the stage for a strong homebuying season in the months ahead. As well, it indicates that homebuyers are acting earlier than the seasonal norm.
According to Lynn Fisher, Vice President of Research and Economics at MBA, the likely reason for the jump is job growth and she expects that activity will continue to increase throughout the year.
"The surprisingly strong employment numbers for the beginning of 2017 suggest that demand for new homes should continue to grow this year," said Fisher.
In addition to volume of applications, the survey also reports that the average loan size of new homes increased in February, too, jumping from $329,860 to $330,208 month over month—a difference of slightly more than $400.
With lower inventory than 2016 — coupled with high demand — 2017 is positioned to be a seller's market. This may give sellers an advantage, but the good news for buyers is that rates are still historically low.
But Will Mortgage Rates Remain Low?
Last week, the Fed announced its first rate hike of 2017 and hinted at additional increases throughout the remainder of the year. The gradually increasing inflation rate along with continued gains in the labor market have the potential to keep pushing mortgage rates up this year. For many, this might not be a deal breaker this Spring, but it could hurt those shopping in more expensive neighborhoods or those right on the margin of being able to afford a home.
However, the good news is Freddie Mac's economist believe most of the reflationary factors have already been baked into current mortgage interest rates and inflation is likely to increase only modestly over the next two years.
"With the housing market on the verge of the Spring homebuying season, this is good news in an environment where historically low mortgage rates will help offset the pace of house price growth and lack of for–sale inventory in many markets," said Sean Becketti, vice president and chief economist at Freddie Mac.
Visit My Home by Freddie Mac® for important resources to help you make informed decisions, whether you are a buyer or seller.