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Why March Matters For buying a home & Interest Rates

There are many things that must fall into place when buying a home, and timing can be important. And as it turns out, March may be one of the best times to purchase a home in 2017.

Rising Interest Rates Put Pressure on Buying a Home before June

In December 2016, the Federal Reserve raised interest rates by a quarter-point. This was the second time rates had changed in nearly a decade. Then last Friday, the feds announced that another interest rate hike is imminent and may occur mid-month. The industry should know more when leaders meet March 14-15. Experts expect to see interest rates rise from 0.75 percent to 1.00 percent.

The changes are contingent on several economic events, including inflation and employment data. And although it may place pressure on buyers to secure their dream home sooner than later, it isn’t necessarily bad news. In fact, rising interest rates are a reflection of a strong job market and lower unemployment. The feds weigh recent data, such as unemployment filings that dropped close to a 44-year low toward the end of February, as part of its decision-making process. There are also benefits to rising rates, according to economists, like boosting mortgage lending, supporting the U.S. dollar and more.

Should buyers expect to see interest rates rise again in 2017? Yes. In fact, three interest rate hikes have been predicted by the central bank.

Buyers to Move Quickly in March

Rate changes typically coincide with federal meetings. The next meetings are in June, September and December, and it’s possible to see interest rates grow to 1.50 percent by year-end.

Those buying a home, and hoping to score the lowest possible rates should consider the timing of these meetings. Financial experts are encouraging buyers to act before March 14, if possible, as interest rates and home prices are only expected to rise in 2017.

Historically Low Mortgages

Despite changing rates, future homebuyers should be reassured that mortgage rates are still at historic lows as a whole.

The highest recorded interest rate was 18.63 percent in 1981. The lowest was 3.13 percent in 2012. Considering the past 45 years, homebuyers are – and will continue to be – in a good place. In addition, much can happen throughout the course of a year — world events, new government administrations, changing regulations, and so on — which can impact rates.

Home Values Normalizing

Also changing? Home values. Appreciation rates are expected to reach 3.9 percent on a national scale, which is slightly lower than 2016 numbers. The industry saw growth at 4.8 percent last year. The Phoenix real estate market is considered an anomaly here. As the top real estate market for 2017, Valley home values are expected to surpass those numbers at 5.9 percent.

According to economists and financial experts, these are signs of a stabilizing housing market, which places home buying within reach for a larger population. In 2016, more than 59 percent of homes were considered in the affordable range for median income earners, and affordability is expected to remain stable, despite rising rates and home values.

Ways to Increase Buying Power

While interest rates and home values are hard to predict and impossible to control, there are many strategies homebuyers can employ to make the most out of real estate investments.

Become an attractive borrower:

  • Work toward a FICO score of 740 or higher.
  • Reduce your loan-to-value ratio to less than 60 percent.
  • Ensure your debt-to-income ratio is no more than 28 percent.
  • Consider lower amortization terms if interest rates are a concern.

Do your due diligence:

  • Work with an expert. Be sure to partner with a realtor who understands your unique home-buying needs and has deep experience in your desired location and price point. If you’re interested in luxury real estate, for instance, your realtor should have a successful proven track record in this niche.
  • Keep an open mind. An experienced realtor will be able to provide the inside scoop, like up-and-coming neighborhoods that will offer a bigger return on investment. Other considerations include various ownership options, properties that haven’t hit the market yet, and more.
  • Leverage rental properties. Investing in a property with multiple rental units may boost your qualifying income and open up a world of new real estate opportunities.
  • Consider Phoenix and Scottsdale real estate markets. Home values are rising faster than anywhere else in the country, making relocating to Arizona look more attractive than ever before.

Signs may point to rising interest rates, but they also point to a strong U.S. economy. Economic indicators make it a good time for buying or building a house — especially locking in a mortgage rate before March 14 — however, it’s always more important to make sure it is a good time for you, as a buyer. Work closely with your real estate agent to meet your unique investment goals — be it in March or later this year.