Rental Prices Rising as Interest Rates Remain Low

As the weather improves and Spring homebuying season is upon us, many renters are also shopping for new apartments. Unfortunately, rental prices are rising at the fastest pace since the recession, according to the apartment market research company Axiometrics Inc. At the same time, interest rates on a home mortgage are expected to stay low for years, as Federal Reserve Bank of New York President William Dudley shared in a speech today. CF Funding predicts these factors will combine to form a boost in housing activity in the coming years.

As the economy has improved and demand for apartments has risen, landlords were able to raise rental rates to an average $1,136.88 in April, which is 3.4 percent higher than in April 2013. Rental prices have seen the biggest spike this year since the recession ended in 2009. In a blog post from April 30^th, Stephanie McCleskey shared that “In Atlanta… only 9% of renters can afford apartments build in the past two years, compared with 22% of renters for units built in the previous cycle,” according to the research company’s affordability scale, which assumes 100 percent of residents can afford the least expensive apartment’s rent per unit.

In an updated blog post, the research company shared today that the apartment market is still strong, however “we still predict that the rate of effective rent growth and occupancy will moderate by the end of the year,” said KC Sanjay.

CF Funding is happy to share that buying a home is still affordable, as interest rates are still near 2014 lows and are expected to stay low. CNN Money shared today that there are three major reasons why the Fed may keep interest rates “below historic averages for the long haul,” based on William Dudley’s speech today. Dudley indicated that the economy is still too weak to raise interest rates, as the Great Recession “scarred households and businesses” and the housing industry faces “several significant headwinds.” Dudley emphasized the issues of mortgage credit availability for those with low credit scores, student loan debt burdens, and housing supply. Dudley also shared that as a large portion of Americans are retiring, the potential for economic growth is smaller than it was in the 1990s.

On a positive note, Dudley expects the federal rate to stay “well below” rates seen in a booming economy, which were as high as 4.25%.  CF Funding will keep readers updated as interest rates may change throughout the year on their website at www.cffunding.com/index.php/mortgagerates. Renters who are considering buying a home may contact the lender at 630-328-8900.

Consumer Attitudes are Positive in March 2014 Housing Survey

Last month, CF Funding reported positive results from the February Fannie Mae National Housing Survey, sharing that home price expectations rose 7 points and 68 percent of respondents said it is a good time to buy a home. This month the lender is happy to share more good news, as 69 percent of respondents now believe it is a good time to buy a home, and 68 percent said they would buy if they were going to move (up 2 points from February). The percent of respondents who believe it would be easy to get a home mortgage has increased by 7 points to a score of 52, an all-time survey high that has only been matched in January of this year.

CF Funding is happy to share that the average 12-month home price change expectation decreased from 3.2 percent to 2.7 percent. Those who expected home prices to stay the same increased by 4 points to 42 percent. The lender agrees with Mortgage News Daily’s prediction of a “pickup in home buying and selling activity this spring” due to positive consumer attitudes in the survey. As Jann Swanson reported in today’s article “Fannie Survey Hints at Warmer Spring for Housing,” over 50 percent of respondents expect mortgage rates to increase over the next year, yet most believe it will be easy to get a mortgage.

The survey also revealed an improvement in personal finances, as 40 percent of respondents said their financial situation improved during the past year, and those who expect their finances to worsen in the next 12 months decreased from 15 to 12 percent. Unfortunately, the number of respondents who believe the economy is on the right track decreased slightly from 35 percent in February to 33 percent in March.  The share of respondents who said their household expenses are significantly higher than 12 months ago decreased from 36 to 33 percent, and most respondents (58 percent) said their household expenses are about the same.

CF Funding would like to remind readers that although home prices are expected to rise, rental prices are also expected to rise. In regards to home rental attitudes, the expected 12 month rental price change was 4.2 percent, a slight decrease from last month’s 4.3 percent. The percent of respondents who believe home rental prices will increase over the next year was 52, up slightly from 51 in February. 41 percent believe rental prices will stay the same, and 4 percent believe they will go down.

According to Fannie Mae, the Monthly National Housing Survey polled a nationally representative sample of 1005 respondents between March 1 and March 23 for the results of this survey.

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