Yes rates are rising, this week the national average for owner occupied rates was at 4.8% with the borrower paying a little over 1/2 of a point for it. But does this mean that there are less borrowers capable of borrowing? Not really. Yes, rates are rising but overall wages are going up at a faster pace than rates are rising so borrower purchase power is actually staying the same and/or increasing. We are also seeing broad based economic improvement. Unemployment including the U6 number (measures true real unemployment) are at historic lows, job creation is at historic highs, and we see broad based wage inflation like we haven’t seen in 30 years.
While rates are definitely in a rising trajectory they are still historically low and in concert with rising wages that are broad based across all sectors we are seeing for the first time in over two decades where wage inflation is outpacing rate inflation. This simply means that even though rates are rising wages are rising faster and therefore when we push the numbers homebuyers are actually paying less in true costs than they were 2 or more years ago.
Lenders have loosened guidelines in the last year along with minimum down payment requirements making it a lot easier for buyers to qualify and come up with down payment requirements. Owner occupied purchases can get in with as little as 3.5% down and in some cases with NO money down. Second home buyers can purchase with as little as 10% down, and investment property buyers with as little as 15% down!
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