Three trends already emerging in spring housing season

What can homebuyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. A recent article at Bankrate.com notes some of the following trends taking shape in the housing market this spring:

1. Expect to pay more for a mortgage

While the Federal Reserve has promised to keep interest rates down, Fannie Mae, Freddie Mac, and the Federal Housing Administration recently have raised their loan fees, which means homebuyers can expect to pay a little more for their mortgage this spring.

Buyers with smaller down payments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount.

Borrowers with higher mortgages can expect higher fees too. In June the FHA will increase its annual insurance for mortgages more than $625,500.
“A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone,” Bankrate.com reports.

2. Greater competition for homes

Housing affordability is at record highs, due to falling home values and mortgage rates hovering near record lows. More buyers are taking notice and jumping off the sidelines. And mixed with sinking inventories of homes listed for sale, competition is expected to increase.

Investors are snapping up bargain prices, often in all-cash deals, which means increased competition for traditional homebuyers too.

“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest,” says Jed Smith, managing director of quantitative research for the National Association of Realtors.

Smith said that first-time homebuyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market.

3. More renters show desire to become homeowners

Recent surveys have shown that buying a home nowadays is more affordable than renting. As such, more renters are finding home ownership more enticing.

The signs are already starting to show: About 59.5 percent of tenants recently surveyed say they intend to renew their leases this year, which is the lowest rate since early 2009, according to a study by Kingsley Associates.