The potential impact of the first-time and repeat homebuyer tax credits has been analyzed and forecasted for months now. Rising interest rates, however, may play the most significant role in driving individuals to purchase homes in New Jersey this spring.
According to a recent article published by USA Today, rates for “30-year home loans surged last week, rising to the highest level in eight months due to the improving economy and the end of a government push to make mortgages cheaper.
“The average rate on a 30-year fixed rate mortgage was 5.21% this week, up from 5.08% a week earlier,” (“Rates on 30-year home loans rise to 5.21%,” USA Today).
With the first-time and repeat homebuyer tax credits, – valued at up to $8,000 and $6,500, respectively – set to expire on April 30, speculation regarding spring homes sales is rampant. If last week’s rates increase is indicative of a future trend, the time to purchase homes in New Jersey is now.
The credits, after all, were designed to draw buyers off the sidelines in the hope of boosting the stagnant real estate industry. When all is said and done, it may be a mortgage rate increase that does the trick.
The USA Today article stated that rates had “dropped to a record low of 4.71% in December, pushed down by a campaign by the Federal Reserve to reduce borrowing costs for consumers. The program ended last week, but the Fed left the door open to reviving the program if the economy weakens, (“Rates on 30-year …”).
While one could argue that the immediate reward associated with the homebuyer tax credits is enticing to the average buyer, a historically low interest rate is a significant opportunity for financially savvy buyers. A single percentage point could result in thousands of dollars saved over the life of a loan.
How the expiring tax credits and interest rate fluctuations impact the sale of homes in New Jersey remains to be seen in the near term. But one would have a difficult time arguing the point that this spring offers an ideal chance to secure the home of your dreams.
