Interest rates continue to fall – what does this mean for Washtenaw County?
This year’s steady decline in mortgage interest rates continues to free fall to historic lows. Rates dropped 2.81 percent, down from 2.87 percent the previous week and down from the previous record low of 2.86 percent in September, according to the Freddie Mac weekly mortgage survey.
These numbers reflect a typical 30-year fixed rate mortgage with 20 percent down. For a 15-year loan the rates have reached 2.35 percent.
In other positive news, applications for mortgages are holding steady – showing just a slight hit of .7 percent for both purchase and refinance applications combined compared to the week before, according to the Mortgage Bankers Association weekly survey. Purchases are up 24 percent year-over-year and refinance applications have increased 44 percent over the same time period.
So, what does all this mean for the Ann Arbor area and Washtenaw County?
Dan Elsea, President – Brokerage Services for Real Estate One
“What it means is pretty much what we have been seeing for the last five years,” says Dan Elsea, President – Brokerage Services for Real Estate One in Ann Arbor. “We will continue to see the supply less than the demand so that means values will continue to rise. As interest rates rise in the future that will take some of the shine off of appreciation because there is a trade-off there.”
Another factor is that home owners who secure these historic low rates might be reluctant to give that up in the future when interest rates eventually go back up. Do they move into a new house in five years with a 4.5 percent interest rate or stay at home with their nice low interest rate below 3?
“I think there will be a few people reluctant to sell to give up those low rates,” Elsea says.
While mortgage rates drop, home prices rise. According to Redfin, a Seattle-based real-estate brokerage firm, homes at every price tier have increased compared to last year, around 6-7 percent. Homes at the very low end of the price spectrum have increased 2.9 percent.
Those are the national numbers and the Washtenaw County area has a few things in play that many other communities don’t.
“What Washtenaw has that other markets don’t is they have a couple of strong underlying engines with the university and hospital along with a mobile and relatively young population,” Elsea says. “That means people move for a lot of reasons, not just economic.”
And values are rising steadily in the Ann Arbor market and have risen quite a bit over the last few months.
“But that’s temporary,” Elsea cautions. “I don’t see that as sustaining long-term, that’s just because of the demand. If you go back to March, April, May the values were flat so it’s just catching up.”
