Strong Economic Forecast Means Now is a Great Time to Buy a Vacation Home

Many people have opted over the years to buy a vacation home in resort areas, such as Breckenridge, Colorado. Some of the reasons cited is to ensure that they have a place to stay and not worry about booking shortages, having a greater measure of privacy, and the ability to generate revenue when they're not using the vacation home by renting it out. A lot of factors go into deciding to purchase a second home for recreational purposes, and one of the main factors is economics. Realtors, such as Ron Shelton of Breckenridge Associates Real Estate, know that many individuals have taken advantage of the historic low rates for mortgages over the last few years and pulled the trigger on buying that second home. However, it appears that the policies of the new administration may impact future interest rates. The strong economic forecast means that now is a great time to buy a vacation home.

Buying a vacation home in the quaint resort town of Breckenridge, Colorado, has been a popular option for visitors, especially in light of how the town's population swells from 4,500 full-time residents to a daily count of over 39,000 during the season. (1) Such a massive influx of visitors means that space is at a premium. Those looking to buy a vacation home for the last decade were in luck due to the incredibly low interest rates being offered in order to bolster the economy after the recent recession. Since 2008, the interest rate from the Federal Reserve has been effectively under one percent, which is a far cry from 2000 when it was over five percent. This has greatly impacted mortgage rates as the average thirty-year fixed mortgage loan rate was 4.17% in 2014, which then dropped to 3.85% in 2015 and then down to 3.57% in 2016. (2) A very low home mortgage rate means that the homeowner would save quite a bit of money over the life of the loan, which is why experienced Realtors, such as Ron Shelton of Breckenridge Associates Real Estate, recommended that people take advantage of those rates while they were still historically low.

However, it does appear that interest rates will soon go up a bit due to the economic policies of the new administration. A reduction in corporate tax rates as well as regulations can mean a surge in business activity. In fact, the Deutsche Bank forecasts that the GDP for the United States could actually double in 2017 and beyond, hitting 2.4% in 2017 and then 3.6% in 2018. This rate of GDP is a marked improvement from the moribund average 1.6% GDP of the previous administration. (3) Other groups are predicting somewhat smaller increases in the US GDP, with Tradingeconomics.com predicting a 2.5% GDP growth in the first quarter of 2017 and then a 2% GDP growth in the third quarter of 2017. (4) While the actual rate varies from group to group, the consensus is that GDP will be more robust in the next few years due to the economic policies of the current administration. This means that the Federal Reserve will bump up the interest rate, which will then impact mortgage loans. Kiplinger believes that the average thirty-year fixed-rate mortgage will rise up to 4.6% by the end of 2017 and that the fifteen-year fixed-rate mortgage will rise up to 3.8% as well. (5) Any licensed Realtor, such as Ron Shelton of Breckenridge Associates Real Estate, will inform their clients that a higher rate means having to pay more over the life of the loan.

This expected rise in interest rates has not occurred yet, which means that now may be the perfect time to go ahead and buy that vacation home. Choosing to act now and secure a fifteen or thirty-year fixed mortgage for a luxury second home can mean saving hundreds of thousands of dollars. Compounding the issue of choosing now to buy a vacation home is that there is currently a surplus of properties for sale. Any experienced Realtor, such as Ron Shelton of Breckenridge Associates Real Estate, will know that prices dip when supply overtakes demand. CNBC has reported that sales of luxury real estate dropped by double-digit percentages in the last quarter of 2016 for the Hamptons, Aspen, and Los Angeles. The overall supply of $1 million or more homes rose one percent in the fourth quarter of 2016 and the number of $5 million or more homes rose by a full fifteen percent. (6) Zillow shows that there are currently 78 homes for sale that are a million dollars or more in Breckenridge. (7)

Realtor Ron Shelton of BreckenridgePropertiesForSale.com says, "Now may be the perfect time to finally decide on buying the vacation home you've been dreaming of in Breckenridge, Colorado. All the economic indicators are pointing to several increases in interest rates over the next year, which will then bump up both fifteen and thirty-year fixed mortgage rates. Even the smallest increase can mean a significant amount of money over the life of the mortgage, so it makes sense to take advantage of the still historically low interest rates available. The recent increase in luxury properties also lends itself to buying now where current owners are more likely to negotiate in order to sell. We can sit down with any client and crunch the numbers, showing the difference between getting a fixed-rate mortgage now and getting one later in the year." (8)

The factors of expected interest rate increases, higher GDP, and a surplus of luxury properties mean that now is a great time to sign the dotted line and purchase a vacation home. The possible savings over a fifteen or thirty-year period can be quite extensive, which makes it very worthwhile to consult a licensed Realtor, such as Ron Shelton of BreckenridgePropertiesForSale.com, and figure out the best option to follow.

References:

1) http://www.townofbreckenridge.com/live/living-in-breckenridge

2) https://www.gobankingrates.com/banking/interest-rate-projections-best-rates-today/

3) http://www.cnbc.com/2017/01/09/donald-trump-plans-will-double-gdp-growth-by-2018-deutsche-bank-says.html

4) http://www.tradingeconomics.com/united-states/gdp-growth/forecast

5) http://www.kiplinger.com/article/business/T019-C000-S010-interest-rate-forecast.html

6) http://www.cnbc.com/2017/01/26/luxury-home-sales-continued-to-slump-in-the-fourth-quarter.html