mortgage interest rates

Impact of new jobs report on Glen home buyers & sellers

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The Labor Department reported last Friday that the economy created 271,000 new jobs in October which is much better than anticipated; and the unemployment rate dropped to 5%. That’s great news, of course.   In simple terms, people without jobs can’t purchase homes, so more jobs = a larger pool of prospective buyers.

Even entry level jobs can positively impact the market for higher priced homes in places like The Glen and greater Glenview where I focus my real estate practice. Why? Because the sale of an existing entry level home turns the home seller into a buyer of another home, presumably one with a higher price point.

There is a downside to today’s report, though my sense is that it will modest, at least in the short term. With the very positive news on job growth, the Fed is more likely to increase interest rates at its next meeting in December. If so, it will be the first increase since 2006. While the federal funds rate is not directly tied to mortgage interest rates, it increases the borrowing costs of lenders who will pass along their additional costs to their home buyer clients in the form of higher mortgage rates. I’m not an economist and I don’t play one on TV, but I suspect that the Fed’s December increase (if it occurs) and any further increases next year will be modest because the Fed does not want to throw a wrench into a still recovering economy.

So here’s the take away:  A healthier employment climate will increase housing demand, but expect modest increases in mortgage interest rates in 2016.

Margaret Ludemann

Realtor, @properties, Glenview Illinois

847-401-1802   margaretludemann@gmail.com

Positive economic environment for real estate sales

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The economic environment for real estate sales was positive through most of 2014, and that good news should continue in 2015. After a slow start in the first quarter 2014 due to the long winter, the American economy had the strongest 6 month performance in 11 years including a 5% growth rate on an annual basis in the 3rd quarter.

Job growth picked up steam in 2014. Nationally the seasonally adjusted unemployment rate fell to 5.6%, down from 7% a year ago and from its high of 10% in October 2009. Illinois unemployment dropped to 6.4% (through November 30), its lowest point since June 2008.

Interest rates remained low during the year. That was somewhat surprising as they were expected to rise in the 3rd and 4th quarters.

The Dow ended 2014 at 17,823, up 7.52% after a remarkable increase of 29.65% in 2013.

The economy is expected to be favorable for home sales in 2015…with growth picking up, unemployment continuing to fall, and mortgage interest rates remaining low (though moving up modestly later in the year). A week ago, mortgage rates hit their 20 month low. Freddie Mac reported the average 30 year fixed rate mortgage interest rate at 3.59%; and 15 year fixed rate mortgages averaging 2.92%

I see home prices rising again, in line with historical norms of 3% to 4%. The bottom line is that if you want to sell your home in 2015, you’ll probably get it done and at a better price than a few years ago.

Margaret Ludemann, @properties Realtor, homeowner in The Glen, Glenview, Illinois