Mortgage rates are higher, and the inventory of homes for sale is lower
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The nation ended 2016 in better economic shape than in recent years. Unemployment is down to 4.6 percent, its lowest level since August 2007; consumer confidence is higher than it has been since July 2007; and home values nationally and in more than half of the major markets in the country have recovered.

The stock market is up and flirting with all-time highs.

It sounds like the perfect backdrop to buy a home in 2017, whether it’s a first-time purchase, a move up, a downsize, or a relocation. Right?

Maybe. But before you take the plunge, advises that you’re going to have to come to grips with two factors that are now decidedly worse for buying than they were at the end of last year: Mortgage rates are higher, and the inventory of homes for sale is lower.

Mortgage rates are a bit more than a quarter of a point higher now than they were at the end of 2015. That translates into payments that are 3 percent higher. Still, that increase can be managed by most.

The key challenge for potential buyers is that rates are now likely to move up more—as much as three-quarters of a point in 2017. That would be increasing payments by an additional 9 percent.

Tight inventory levels have been a problem for more than four years. As sales have grown, supply has fallen. The age of inventory—how long homes sit on the market—drops dramatically as home buyers burn through the available stock.

It was an abnormally strong autumn for home sales because frustrated buyers are keeping at it even after the end of peak buying season. More new buyers emerged later in the peak season.

As mortgage rates started to move up in October and then accelerated their rise in November and December, a new sense of urgency was added to the mix.

As a result of this unusually strong demand in the slower time of the year, 2016 ended with at least 10 percent fewer homes for sale than last year.

“If your New Year’s resolutions include buying a home, I would suggest getting an early start,” said Jonathan Smoke, chief economist for “Buyers in January and February face far less competition from other buyers, yet inventory is only marginally lower than in the spring.”

Since mortgage rates are likely to move up as the year progresses, the beginning of the year represents the best time to lock in rates before they get even higher.

Early-year buyers can use the holidays to get ready. Organize financial information to make getting pre-approved for a mortgage easier. Find an expert local Realtor to help. And sign up at for alerts on new homes and price changes on neighborhoods that interest you.

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