Mortgage rates: Low and stable in 2013
Mortgage rates should remain low and fairly stable through most of 2013.
The slow economy should produce some downward pull, especially in the first-half of the year. Also, Federal Reserve policy should tend to keep mortgage rates low and generally stable throughout 2013.
A few considerations might push mortgage rates higher at times, including concerns about inflation, unease regarding an impending change at the helm of the Federal Reserve, or an economy which shakes off slow growth and begins to put in above-par performances for several quarters.
Not to worry, 2013 should present the best borrowing opportunity in perhaps 60 years (just like in 2012).
Shorter-term mortgages in 2013
Obtaining shorter-term mortgages was a trend which formed in 2012 and should carry into 2013. While primarily a refinance-fostered phenomenon in 2012, the low-interest-rate environment in 2013 might just see somewhat more homebuyers looking at 25- and even 20-year mortgage terms. This change is more likely to come from homebuyers in the trade-up market, where activity should start to improve as the economy slowly firms.
For other borrowers, rebuilding lost equity will continue to be a desire (if not a focus) and we think we'll continue to see both refinancing to shorter than 30-year terms as well as a move toward retiring mortgage balances more quickly though prepayment.
Recovery in home sales continues
Despite a strong market for rentals and still-wary consumers, we think 2013 will be a relatively good year for home sales.
At some point, the cost of renting a place to live becomes close enough to the cost of actually owning a home giving the renter a reason to consider a purchase instead. Kiplinger forecasts that average rents will rise perhaps 4.5 percent in 2013, and with the worst of the real estate downturn arguably falling behind us, more renters or live-at-homes will likely take the plunge and buy a home.
The Federal Reserve remains committed to getting people back into the market, and even with some signs of firming, home prices should remain attractive. It's hard to reckon a final figure for the year, but we should be close to five million sales in 2012. For 2013, probably five percent more or so should be expected.
There will be fewer homes at rock-bottom prices in 2013, but a “seller’s market” will form in some areas of the country.
