Home prices are higher in metro Atlanta, and so are mortgage rates and closing costs.
All three are signs that the local housing market continues to roar back from the meltdown just a few years ago as the economy continues to strengthen with more homeowners and prospective homeowners finding jobs and a paycheck.
The strengthening economy was a primary reason that Federal Reserve policymakers signaled recently that they will do a little less in trying to stimulate economic activity by influencing interest rates.
In interviews with The Atlanta Journal-Constitution, analysts at Zillow, the online housing listing service, and Bankrate, which tracks loan rates in Georgia and nationally, say consumers can expect to see mortgage rates trending higher in the new year even if they are still at historically low levels.
Erin Lantz, director of mortgages at Zillow, said weeks of anticipating that the Fed would “dial back” its influence on interest rates and the actual announcement that changes in its economic stimulus program would begin in January have already begun to push rates higher.
“The stimulus program was meant to keep interest rates lower,” Lantz said. “The economy is getting back on its own footing and doesn’t need to rely on federal stimulus as much.”
In a weekly report, Bankrate said the average 30-year fixed-rate mortgage in metro Atlanta rose to 4.54 percent most recently, from 4.47 percent in the previous report and 3.76 percent at the start of 2013. The average 15-year fixed rate rose to 3.59 percent from 3.48 percent.
Greg McBride, Bankrate’s senior financial analyst, said closing costs, which lenders charge to process a loan, are up 6 percent from last year in metro Atlanta. By comparison, inflation is up less than 2 percent.
McBride said lenders, who are paying out billions of dollars to settle claims they botched loans and wrongly foreclosed on thousands of borrowers, are facing higher costs in complying with new regulations designed to prevent the problems that led to the housing crises. The due diligence now includes verifying applicants’ employment, income and debt obligations multiple times before closing on a loan.
Those higher loan processing costs are being passed on to borrowers.
“Secondly, there is no wiggle room in terms of fees quoted by a lender on the good-faith estimate of costs,” McBride said. Lenders are required by law to provide borrowers with a written best estimate of what a loan will cost, and it shouldn’t come as a surprise if they go with the higher end of a range. “Once they put that number on the form, they are locked in. It can’t be a penny more,” McBride said.
While mortgage rates move independently of closing costs, both are expected to continue rising in 2014, along with housing prices. The median sales price in metro Atlanta was $181,000 in November, up 20.7 percent from the prior year, according to data from the Atlanta Board of Realtors.
McBride’s advice to prospective homebuyers is to shop around for the best mortgage interest rates and loan fees, and above all “put your best foot forward.”
“Pull copies of your credit report from each of the major credit bureaus before you apply for a mortgage, and give yourself time to get any errors on your credit report corrected,” McBride said.
“Don’t do anything that could inadvertently undermine your credit score,” he added, “such as opening or closing credit accounts, or racking up large balances.”
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