Low Interest Continues; All Cash Chinese Buyers
Well, a number of interesting items have popped up this past week. The most interesting from this point of view are projections for the continuation of low interest rates, likely through the rest of 2015, and possibly into next year, as well as an influx of all cash buyers from China. For more info, read on below.
A message to homebuyers anxious about rising interest rates on home loans: relax. You’re not going to miss out on today’s super low mortgage rates if you’re just now starting to search for your dream home in the Bay Area. (Or that getaway ski home in the Lake Tahoe/Truckee region.)
Recent analysis and crystal-ball gazing by economists has generally put off a rate increase until mid-December at the earliest, and quite possibly not until March 2016. The next meeting of the Federal Reserve’s Federal Open Markets Committee is scheduled for Dec. 15-16, and Fed Chairwoman Janet Yellen has made it clear she will give the markets plenty of time to adjust to the change. If the global economy doesn’t improve markedly by December, March is a more likely date for a rate hike.
And even when rates do increase, they will crawl higher, not jump.
The Bay Area’s Yellen — remember, she was head of the San Francisco Federal Reserve Bank before taking the top job — has said that future interest-rate increases will be gradual, no more than 1 percentage point a year. And perhaps much less: Jonathan Smoke, chief economist for Realtor.com, told The New York Times that he expects to see a gradual increase in interest rates totaling no more than half a percentage point over a 12-month period.
That means that today’s interest rates will still be a bargain by historical standards. And that will help make homes in the Bay Area and across Northern California much more affordable over the life of a mortgage than their price tags suggest.
Interest rates on a 30-year, fixed-rate mortgage averaged 3.85 percent last week and have been largely unchanged for more than a month, according to Freddie Mac’s weekly rate survey. Fifteen-year mortgages were at 3.07 percent last week, with five-year adjustable-rate mortgages at 2.91 percent and one-year ARMs at 2.53 percent.
It’s worth noting that mortgage rates in Western states lately have been lower than the national average. Freddie Mac said the average 30-year FRM in the West was 3.80 percent, compared with 3.82 percent in the North-Central U.S., 3.87 percent in the Northeast, 3.89 percent in the Southeast, and 3.90 percent in the Southwest.
The bottom line: Talk to your real estate professional, start scoping out desirable neighborhoods, and get started on a preapproved home loan. But don’t forget to stop and smell the roses in your new backyard.
Now, regarding those all cash buyers from China, the following is the latest from the horse's mouth.
Almost half of Chinese homebuyers across the country are paying for their purchase entirely in cash, a substantial increase over the past decade.
A RealtyTrac blog post says that for the 17 months ended May 2015, 46 percent of transactions by Mandarin-speaking buyers were all-cash deals, up from 14 percent in May 2005. Nationwide, all-cash transactions rose from 20 percent in 2005 to 33 percent in 2015.
“Cash buyers across the board are playing a much bigger role in the housing market now than they were 10 years ago, and that is particularly true for Chinese Mandarin-speaking cash buyers, who are more likely to be foreign nationals,” RealtyTrac Vice President Daren Blomquist said in a statement accompanying the report. “Foreign cash buyers have helped to accelerate U.S. home price appreciation over the past few years given that these buyers are often not as constrained by income as local, traditionally financed buyers.”
Over the past decade, Mandarin-speaking homebuyers have increased by 9 percent, more than any other foreign-language group. Earlier in the summer, a survey by the National Association of Realtors found that buyers from China were responsible for 16 percent of U.S. international property sales, also the most of any nationality. For the 12 months ended March 2015, China invested almost $29 billion in the U.S. housing market.
The Bay Area is a top destination for Chinese homebuyers, who are attracted to the region for its relative value compared with property costs in other international cities, high-caliber educational opportunities, and healthy lifestyle. In an April interview, Pacific Union CEO Mark. A McLaughlin told SFGate that 25 percent of homebuyers in Palo Alto had a connection to China.
McLaughlin, who developed and implemented Pacific Union’s unique China Concierge program in 2013, will travel to Beijing in November to present at Hurun Report’s 2015 Top Entrepreneurs Forum.
Need any further info on the current market or what your home may be worth, give us a call! You know the numbers: Peter: (415) 279-6466; Jane: (415) 531-4091. We'd be pleased to update you or assist in any other way you may require.