One of the biggest questions plaguing the current housing market is where mortgage interest rates will be at this time next year. Over the last two months, rates have begun to creep up (see chart).

Though we don’t like to project rates moving forward, we do want you and your family to have the information you need in order to decide whether to wait before buying your first house or moving up to your ultimate dream home.

Here are the most current mortgage rate projections from Fannie Mae, Freddie Mac, the Mortgage Bankers’ Association and the National Association of Realtors.

Projecting interest rates is not easy. So what should you do – do it now or wait? We like the advice Doug Duncan, senior vice president and chief economist at Fannie Mae, recently gave:

“The rule for when is it time to buy is always the same: given your household budget and where current interest rates are, if it makes good financial sense to take out a home loan today, then today is the day to do it.”

Bottom Line

If you are ready, willing and able and are thinking of buying a home over the next twelve months, waiting may not make sense.

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States.

The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide!

The other interesting findings in the report include:

• Interest rates have remained low and even though home prices have appreciated around the country (3.9%), they haven’t greatly outpaced rental appreciation (3.7%). “In the past year, these two trends have made homeownership even more affordable compared with renting.”
• Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
• Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989. 

Bottom Line

Buying a home makes sense socially and financially. Rents are predicted to increasesubstantially in the next year, so lock in your housing cost with a mortgage payment now.

If you are planning on selling your home over the next two years, now may be the time to act. Demand is high, supply is low and many homeowners are benefiting from an almost auction atmosphere with several buyers fighting for their house in the current multi-bid environment. Higher prices and less stringent contingencies are making it easier for the seller and their family.

However, there may be more (and better) competition about to hit the market in the form of newly constructed homes. This may put an end to the buyers’ frenzy over the limited inventory of existing homes which has been below normal levels for over a year.

According to the latest report from the National Association of Realtors (NAR), the forecast for new housing starts and sales will increase significantly over the next two years:

• NAR is forecasting 1.1 million new housing starts in 2015, jumping to 1.4 million in 2016.
• New home sales are projected to increase from the 437,000 in 2014 to 570,000 this year and 720,000 in 2016.

Bottom Line

In major urban areas across the country, building cranes are again stretched across the city skyline. In many suburbs, you can again hear the thumping of a carpenter’s hammer in the background. Those are the sights and sounds that inform us that it may be time to sell.