Mortgage Rates Drop as Home Prices Increase Slightly

At a time when mortgage rates are at all-time lows, some cities in the United States are experiencing an increase in home prices. June marked the third consecutive month of increase in home prices in several cities, but many analysts are expecting those prices to fall throughout the rest of the year. One of the reasons for the jump in prices was the earlier surge in sales as a result of the first-time homebuyer’s tax credit. Buyers were jumping into the market in droves so they could take advantage of the $8,000 credit and, as a result, this drove home prices up as demands rose. In hard numbers, the home prices in the 20-city study were one percent higher in June than they were in May and more than 4 percent higher in June than they were one year ago.

Between January and March of this year, the home prices across the country dropped by nearly 3 percent. However, between April and June of this year, those same prices went up by nearly 4.5 percent. Those numbers increased despite the stricter rules that banks have on lending and the unemployment problem that continues to be a problem across the country.

Three cities where the biggest increase in home prices include Minneapolis, Detroit and Chicago. In each of those three cities, the home prices went up by about 2.5 percent.

Overall, home prices have increased by 6 percent since April 2009. However, the prices are 28 percent lower on average than they were in July of 2006 when they hit their peak. Currently, sales of existing homes are at 15-year lows and there is a huge inventory of available homes on the market. As a result, we should start seeing those prices start to go back down now that the surge of first-time buyers has subsided. This means that people who are trying to get out of their current homes will likely be slashing the prices so they can be done with them. Lenders will also be doing the same thing to help get homes off of their books.

Are the home prices low enough to encourage you to make a purchase? Or are some of you still waiting until they drop even further? With mortgage rates as low as they are, this might be the best time to buy a new home.