And as you might expect, the answer is somewhat complicated. Mortgage interest rates are set by a number of factors, but a relatively good barometer is basing mortgage interest rates toward the 10 year US Treasury Bonds. This link provides some insight to the 10 year Treasury and mortgage rate connection. This week Forbes came out with an article discussing what is spooking home buyer's the most and the answer might surprise you. Here is a link to that article What is spooking today's homebuyers?
Since the Federal Reserve's announcement this week that they were raising their rate from 0% to .25%, the 10 year Treasury has actually went down slightly. Stated differently, the increase in the Federal Reserve has not equated to an increase at all in mortgage interest rates. Yet.
Treasury bonds are traded in the world market, and as such, are being compared to other country's bonds by investors. With the turmoil occurring in other regions of the world, particularly European countries, world investors seeking higher returns are looking elsewhere.
As a general rule of thumb, the Federal Reserve raising interest rates is a way to curb inflation which normally translates to higher mortgage interest rates. So we'll continue to monitor this over the next year to see where this goes, but we expect a gradual increase in mortgage interest rates over this period.
In looking at the Year over Year numbers for home sales in the Matanuska Susitna Borough, there is something that jumps out as more of a factor for home prices into 2016 than an increase in mortgage interest rates. The average price of home prices in the Matsu is up 6% Year over Year shown by the report below.
In addition to the loss by waiting, those renting in the Matsu might not know that the price of rent is usually much higher than actually owning when you take into account the added cost benefits such as principle reduction, appreciation, and income tax savings. The worksheet below illustrates the difference between renting vs owning here in the Matsu Valley housing market.
As you can see by the worksheet above, the actual cost of home ownership instead over renting actually results in an income to the home buyer of about $164 a month after the principle reduction, appreciation and income tax savings are factored in Read that again...based on a very accurate model of the current Matsu real estate market, your home actually paid you $164 a month to live there given the example shown above!
When you factor in the Cost of Waiting and Rent vs Own worksheets the total amount of money saved/earned is $198,929 over 7 years if all factors stay the same over that period.
Can all of these factors change in future? Unquestionably. But based on the information that we are currently monitoring, this is a very accurate snapshot of what your housing needs would look like based on the averages currently found here in the Matsu Valley housing market.
If you have questions about your specific housing needs, we can prepare a customized analysis for you based on your actual situation. If you are in the market to buy, simply log on to our website to perform a search to see what the market is currently like. If you have to sell your current home, you can log on to our website's selling page to find out more. I will do a blog about that later in the week to show you what the differences in what doing that now looks like too.
You can always call our office to speak with us directly too at (907)414-9456, or email me at Greg@AlaskaHomeSellers.com
Have a great week!
Greg Shepard
Associate Broker/REALTOR
Jack White Real Estate Matsu Office
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