Uncertainty of Rising Mortage Rates may Spur Title Insurance Purchases

Posted by Amrock

Despite
mixed signals in the housing market, economists expect growth to continue at a
strong pace throughout 2014, even as interest rates and home prices rise. 

Growth
forecasts

​MarketWatch reported that, while economists are predicting positive growth in
2014, forecasts vary wildly, indicating a wide degree of uncertainty concerning
the effects rising interest rates will have on the economy and the housing
recovery. For instance, economists predicted growth as low as 8.2 percent in
2014 and as high as 23.1 percent.  In comparison, the Blue Chip
report expected residential investment to rise by 13.7 percent in 2013 over
2012 figures. 

Still,
economists polled by MarketWatch forecast housing starts at a seasonally
adjusted annual rate of 915,000 homes, about 25 percent greater than 2012, but
still shy of the 1.7 million homes required to meet demand. Consequently, total
inventory is improving slightly, moving from 5 months to 5.2 months, despite
the available home inventory being much smaller. Generally, a six-month supply
of homes is considered healthy and balanced. 

The Mortgage
Bankers Association, however, reported a nearly 60 percent decline in mortgage refinance applications due to the one
percentage point gain in interest rates since May. However, new home purchases,
despite a slight increase in the size of loan amount, increased by 14 percent
in July compared to June. 

As reported
by CE Pro, sales of new homes during the first six months of 2013 have outpaced 2012 by 28.4 percent, an increase that may be
directly correlated with a 24.3 percent gain in overall starts in 2013 compared
to the same period. Many of the new homes entering the market are being
gobbled up by eager homebuyers looking to take advantage of still low interest
rates. 

Rates
rise

As the Fed tapers its bond purchases later this year, interest
rates will rise. So mortgage applications will decline, along with refinance
applications. Undoubtedly, the rising interest rates will impact home
affordability. The tempered demand, therefore, could help alleviate strained
inventory levels. These forces should cancel out, give or take a few points
either way. Larger inventory levels put downward pressure on home selling
prices, making homes more affordable. When all is said and done, the
market is healthy and is expected to continue normalizing throughout 2014
as interest rates and inventory levels temper prices and demand. 

“Rates have risen over the last three months, this is true,” said         Title Source National Sales Director Jason Hall. “Realistically, interest rates are still at incredibly low levels. The better thing is that home sales have increased and values are rising. The rising values means that more consumers have equity and they can use that equity to do home improvements or pay off existing debt.”

Given the
uneven forecasts by economists, however, the impact on the market really cannot
be predicted. For that reason, title insurance should be a real consideration
when closing on your home. The uncertainty of the market could affect you, so
title insurance is the low-cost way to protect yourself against loss. 

For more information about title insurance and how it protects against potential loss, click here!