After bottoming out during the first part of January 2012, home values in Arizona continue to rise. Last year, the average home value increased by 7.4 percent to $205,000 with an expected increase this year of about 2.5 percent. These increases make buying a home in the state quite attractive, especially when coupled with Arizona mortgage rates.
What are the current mortgage rates in Arizona?
Although mortgage rates are still historically low, they are slowly creeping upward.
·        As of the last week of March 2016, mortgage rates for a 30-year fixed loan average 3.6 percent, an increase of 0.02 over the previous week. The national average is 3.9 percent.
·        For 15-year fixed-rate loans, the rate is 2.82 percent, an increase of 0.04 percent. The national average is 3.13 percent.
·        Refinancing with 30-year fixed-rate loans garners 3.61 percent, an increase of 0.01 percent. For 15-year fixed-rate refinancing, the rate is 2.83 percent, an increase of 0.03.
·        For 5/1 adjustable-rate mortgages (ARM), which are fixed for five years and then adjust every year after that, the rate is 3.1 percent, an increase of 0.03 percent. The national average is 3.36 percent.
·        Refinancing with a 7/1 ARM gets a rate of 4.22 percent, a decrease of 0.01 over the previous week.
Do FICO scores change interest rates?
Rates vary by city as well as credit score and down payment. For example, assume a 30-year fixed rate in Phoenix on a $200,000 loan with 10 percent down.
·        An excellent FICO score of 740 or greater gets a rate of 3.59 to 3.75 percent.
·        Dropping the score to between 700 and 719 increases the rate to between 3.72 to 3.87 percent.
·        A further drop of between 660 and 679 pushes the interest rate to between 3.97 and 4.12 percent. Scores below these numbers are considered fair to bad, which may make it difficult to impossible to get a mortgage.
How can you improve your FICO score?
Because interest rates are affected by the FICO score, improving this number can reduce your monthly payment, allowing you to qualify for a more expensive home while saving you thousands over the life of the loan. Improving this score should be a top priority even before attempting the house hunt.
·        About a year before you intend to look for a home, check your score. Many credit cards and banks reveal this number without charge. If your institutions do not offer that privilege, check Credit Karma to find your score.
·        Your score comes from your financial history, which you can view by obtaining a credit report. You’re entitled to one free copy per year from each of the three major credit reporting companies. The easiest way to obtain this copy without cost or obligation is to go through Annual Credit Report.com. Look for any errors, so you can bring them to the attention of the reporting company. By law, it must correct the mistake but this process can easily take many weeks of months.
·        Increase you score by paying your bills on time, eliminating as much debt as possible, and by not applying for new credit accounts. A mortgage lender wants you to have fewer financial obligations so you can focus on paying for its loan.
What is the housing market like compared to the nation?
The average sale price of a home in Arizona as of March 2016 is $194,600, which is more than the average $186,000 for a home in the United States. Arizona ranks as the 20th most expensive state for home purchases among all states and the District of Columbia. The most expensive place to buy a home is Hawaii at an average $547,600. The cheapest is West Virginia at $88,900.
Market trends vary by location, even among the larger metropolitan areas.
·        In Phoenix, the median list price of a home in February was $287,500 compared to $235,000. Inventory went down to 4,223 houses compared to 4,612 and the number of distressed properties dropped to 1 percent from 2 percent. However, the median number of days on the market increased to 162 from 62.
·        In Tucson, the median list price of a home dropped to $199,500 compared to $205,000 a year ago. Inventory increased to 5,188 from 4,299 and so did the number of distressed properties to 8 percent from 3 percent. Median number of days on the market increased slightly to 81 from 69.
What is the forecast for the Arizona housing market?
Analysts see the Arizona housing market behaving in 2016 much as it did in 2015. While economic growth won’t be strong, the economy is still expected to increase at 1.8 percent. The passage of SB 1070 has reduced the immigration component of population growth from 42 percent to 20 percent. About 89 percent of the jobs lost during the economic downturn have come back but only 15 percent have returned from construction. Fewer people are moving to Arizona. All these factors contribute to fewer buyers and a housing market that should remain the same. This would seem to portend good news for those wanting to wait to make a home purchase.
However, interest rates are slowly rising. Freddie Mac forecasts a potential increase toward 5 percent in 2016. Fixed-rate mortgages for 30 years may be around 5.2 percent by the end of the year. That house you want may not increase in price by the end of the year. But the cost to buy it definitely will, which may put it out of your reach. With this in mind, buying sooner rather than later is a good idea.
2 Point Highlight
Although mortgage rates are still historically low, they are slowly creeping upward.
With this in mind, buying sooner rather than later is a good idea.
