2017 Housing Trends | Associated Bank | WGN Radio
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THE OPENING BELL As Heard On WGN 720 AM Chicago

2017 Housing Trends: How Interest Rates Are Affecting Buyers + Who's in the Market

The year 2017 is shaping up to potentially be a very good one for some sellers, and to be the year we see a big return of "boomerang buyers," according to John Horton, Senior Landing Manager at Associated Bank.

Horton notes, too, that even in a climate with minor interest rate increases, people shouldn't assume they won't be able to buy. This is good news for those looking for a new home in the new year.

"It's not as bad as people think," Horton said. "If you break it down and you say, 'Ok I'm going to buy a house and on Tuesday rates were 3 and 5/8 (percent) and now on Friday they're 4 percent.' If you look at those numbers, for every $100,000, that swing is $21."

"So it is kind of a shock to the system to say 'Ok my rates aren't in the 3s anymore. I'm in the 4s,' but for every $100,000, your principle and interest payment only goes up 21 bucks, so for a half-million-dollar mortgage, you're going to be (paying) $105 a month more, which is a lot of money, but it's not as bad as it really seems."

Knock Knock. The Millennials Are Here. And They're Securing the Largest Loans Available.

"You look at the millennials, those guys (are) coming back in. (Some reports) said the millennials coming back in the market are going to spend an average purchase price of $500,000, which is a jumbo loan, which is an absolutely phenomenal product."

Horton notes it's clear millennials are feeling better about the economy overall.

"You look at those millennials coming in, where they're going, where they're moving, the jobs they have that they feel are secure," Horton said. "Those guys are coming back in the market."

Wanting to Sell a Home in the $500,000 to $750,000 Price Range? This Could Be the Year to Sell.

"They're talking about (a) shortage of inventory on houses for 2017," Horton said. "It could be a seller's market, (especially for) the high-end homes from $500,000 to $750,000 ..."

"Lower-end homes, two-bedrooms, three bedrooms, you're seeing a drastic increase," Horton said. "So they're saying if you're a move-up buyer you might want to hang tight, but if you're selling a home in that 500 to 750 area, you're probably going to get what you want."

What About Those Pesky Interest Rates?

"Your ARM (adjustable rate mortgage, which go up over time) rates, your five-, seven-year ARM rates are still in the mid 3s," Horton said. "(The) average time someone owns a home is between three to five years. You could be there 30 years – I'm not saying people are going to move. It is a gamble. Some people don't like a gamble (but) … it's still a great time to buy."

Interest rates, even at 4 percent, are nowhere near historic highs, Horton notes. He adds that since banks have been anticipating interest rate increases for the last several years, they've been factoring them into their plans. Therefore, people likely won't see large enough increases in payments that would be a shock to the system.

Perhaps more worrisome than slight increases to mortgage payments is that some people have been priced out of the market, Horton notes.

"The other issue we have is you have a lot of people that were (prequalified for loans) that were floating," Horton said. "So if you were floating at 3.625 and your ratios were really close (and) you didn't lock in, you're now at 4 and you're closing in two weeks that extra couple of bucks a month could knock you out of the park, so you do see people affected by the rates that can no longer buy the house they wanted to."

The Boomerang Buyer is Re-Entering the Market.

Look out, buying market. It's about to get a little more crowded.

"The boomerang buyers, nine years ago, when the market kind of went down the tubes, a lot of people went into foreclosure," Horton said. "They have a seven-year timeframe to build their credit back. Well guess what's coming? That seven-year timeframe is up. So you're looking at a lot of the boomerang buyers, which are going to be very cautious just because what they went through (to) rebuild their credit, but you have an entire group of boomerang buyers that are ready to buy and a lot of millennials that are ready to buy."

Are you ready to buy? Learn more about what we have to offer at Associated Bank.

*Pre-qualification is not a guarantee of approval and is based on the verbal information provided at the time of the request and is contingent upon, but not limited to, a full underwriting review. Pre-qualification is valid for 120 days from date of issuance and is not transferable. Employment and credit history must remain the same during the pre-qualification period. Purchased property must meet underwriting requirements and may require private mortgage insurance.

Loan products are offered by Associated Bank, N.A. Loan products are subject to credit approval and involve interest and other costs. Please ask about details on fees and terms and conditions of these products. Property insurance and flood insurance, if applicable, will be required on collateral. Member FDIC. Equal Housing Lender.

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