|James Fleshman with |
Foundation Mortgage Corp.
With the impending change in the White House and the balance of power firmly in the grasp of the Democrat party, the impact on the economy is still uncertain. Mortgage rates have been historically low in the past year, which has been a large part of the real estate market’s success.
Buying a house in 2021 is more affordable now than it has been in the last fifty years. The end of December 2020 had rates for a thirty-year fixed mortgage at 2.96% and a fifteen-year fixed mortgage at 2.38%.
“It’s been interesting, as we watch the very unusual political scene and how it may impact rates,” said James Fleshman, President and Founder of Foundation Mortgage Corporation. He began his career in the mortgage industry in 1991 and started his own company in 2001. He’s helped thousands of clients with purchase and refinance loans, reverse mortgages and more.
“You’ve got all kinds of cross currents that are happening and a fear of inflation coming down the road with spending and the stimulus. Rates went up last week a quarter percent and came back down this week. The only thing I can see causing this to happen is government intervention, where they’re continuing to buy mortgage-backed securities. For as long as that continues, we will be in good shape,” Fleshman said.
The local Columbia real estate market has seen record activity, with exceptionally low housing inventory in December. According to the Consolidated Multiple Listing Service, the market-wide inventory level was down almost 44%. That level means there is just over a one month’s supply of homes available for sale.
The last month of the year is typically one of the slowest for real estate sales, but a strong buyer demand continued to drive higher activity than normal. The median sales price is up almost ten percent, to $200,000. The price range that sold the fastest was the $150,000 - $200,000 segment, with an average days on market figure of 34 days.
“As we watch the Fed talk about what they plan to do, they have no intention of tapering their purchases and I anticipate rates will stay low. Does that mean two and a half or three percent, I don’t know, but I do think it will stay low for the foreseeable future,” Fleshman said.
“Gold and silver have skyrocketed over the last twelve months and all kinds of things are happening that should be having an impact, but yet rates remain low. None of this is acting like the market typically does. There’s an influence and it is almost entirely the Fed buying billions of dollars in mortgage-backed securities,” he added.
The purchase by the Fed of such a high volume of mortgage-backed securities is keeping the market afloat and there’s no indication of a course change at the government level anytime soon.
Fleshman’s group has an interesting approach when thinking about when is the most advantageous time to buy a home. “Do you buy when the market is hot and everything is up? You’re paying top dollar for the real estate, but you’re getting it at the lowest rate in the history of mortgages. Say the market cools and rates go up to four percent, which is still on the low end. You’ll be better off to pay ten percent more for the house now at a lower interest than to wait to hopefully save money on the purchase price but pay another point and a half on the interest rate,” he explained.