All • Buying • April 18, 2024

Looking for That Light

by Rodney Ward

Is It Getting More Affordable To Buy a Home?

Over the past year or so, a lot of people have been talking about how tough it is to buy a home. And while there’s no arguing affordability is still tight, there are signs it’s starting to get a bit better and may improve even more throughout the year. Elijah de la Campa, Senior Economist at Redfin, says:

“We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”

Here’s a look at the latest data for the three biggest factors that affect home affordability: mortgage rates, home prices, and wages.

1. Mortgage Rates

Mortgage rates have been volatile this year – bouncing around in the upper 6% to low 7% range. That’s still quite a bit higher than where they were a couple of years ago. But there is a sliver of good news.

Despite the recent volatility, rates are still lower than they were last fall when they reached nearly 8%. On top of that, most experts still think they’ll come down some over the course of the year. A recent article from Bright MLS explains:

“Expect rates to come down in the second half of 2024 but remain above 6% this year. Even a modest drop in rates will bring both more buyers and more sellers into the market.”

Any drop in rates can make a difference for you. When rates go down, you can afford the home you really want more easily because your monthly payment would be lower.

2. Home Prices

The second big factor to think about is home prices. Most experts project they’ll keep going up this year, but at a more normal pace. That’s because there are more homes on the market this year, but still not enough for everyone who wants to buy one. The graph below shows the latest 2024 home price forecasts from seven different organizations:

These forecasts are actually good news for you because it means the prices aren’t likely to shoot up sky high like they did during the pandemic. That doesn’t mean they’re going to fall – they’ll just rise at a slower pace.

3. Wages

One factor helping affordability right now is the fact that wages are rising. The graph below uses data from the Federal Reserve to show how wages have been growing over time:

Check out the blue dotted line. That shows how wages typically rise. If you look at the right side of the graph, you’ll see wages are climbing even faster than normal right now.

Here’s how this helps you. If your income has increased, it’s easier to afford a home because you don’t have to spend as big of a percentage of your paycheck on your monthly mortgage payment.

Bottom Line

If you stack these factors up, you’ll see mortgage rates are still projected to come down a bit later this year, home prices are going up at a more moderate pace, and wages are growing quicker than normal. Those trends are a good sign for your ability to afford a home.

Buying • April 17, 2024

Is It Better To Rent Than Buy a Home Right Now?

by Rodney Ward

You may have seen reports in the news recently saying it’s more affordable to rent right now than it is to buy a home. And while that may be true in some markets if you just look at typical monthly payments, there’s one thing that the numbers aren’t factoring in: and that’s home equity. Here’s a look at how big of an impact equity can have and why it’s worth considering as you make your decision.

What the Headlines Are Based on

The graph below uses national data on the median rental payment from Realtor.com and median mortgage payment from the National Association of Realtors (NAR) to compare the two options. As the graph shows, especially if you’re not looking for a lot of space, it can be more affordable on a monthly basis to rent:

But if you’re looking for something with 2 bedrooms, the gap between the median rent and the median mortgage payment starts to shrink to a difference that may be more doable. The median monthly mortgage payment is $2,040. The median monthly rent for 2 bedrooms is $1,889. That’s a difference of about $151 a month. But here’s what happens when you factor in equity too.

How Equity Changes the Game

If you rent, your monthly rental payments only go toward covering your housing costs and your landlord’s expenses. So other than saving a bit more per month and maybe getting your rental deposit back when you move, the money you spent on housing each month is gone – forever.

When you buy, your monthly mortgage payment pays for your shelter, but it also acts as an investment. That investment grows in the form of equity as you make your mortgage payment each month and chip away at what you owe on your home loan. Your equity gets an extra boost as home values climb – which they typically do.

To give you a clearer idea of how equity can really stack up fast, here’s some data for you. Each quarter, Fannie Mae and Pulsenomics publish the results of the Home Price Expectations Survey (HPES). It asks more than 100 economists, real estate professionals, and investment and market strategists what they think will happen with home prices. In the latest release, those experts say home prices are going to keep going up over the next five years.

Here’s an example of how equity builds based on the projections from the HPES (see graph below):

Imagine you purchased a home for $400,000 at the start of this year. Chances are, since you bought, you plan to stay put for a while. Based on the HPES projections, if you live there for 5 years, you could end up gaining over $83,000 in household wealth as your home grows in value.

Here’s how that stacks up compared to renting, using the overall median rent from above:

While you may save a bit on your monthly payments if you rent right now, you’ll also miss out on gaining equity.

So, what’s the big takeaway? Whether it makes more sense to rent or buy is going to vary based on your personal finances. It’s not a good idea to buy if the numbers truly don’t work for you. But, if you’re ready and able, adding equity as the final puzzle piece may be enough to help you realize buying is a better move in the long run.

Bottom Line

When it comes down to it, buying a home gives you a benefit renting just can’t provide – and that’s the chance to gain equity. If you want to take advantage of long-term home price appreciation, let’s go over your options.

Selling • April 16, 2024

Should You Wait For Mortgage Rates to Come Down Before Moving?

by Rodney Ward

Do you have a move on your mind? Are you wondering whether you should wait to sell until mortgage rates come down before you spring into action. Here’s some information that could help answer that question for you.

In the housing market, there’s a longstanding relationship between mortgage rates and buyer demand. Typically, the higher rates are, you’ll see lower buyer demand. That’s because some people who want to move will be hesitant to take on a higher mortgage rate for their next home. So, they decide to wait it out and put their plans on hold.

But when rates start to come down, things change. It goes from limited or weak demand to good or strong demand. That’s because a big portion of the buyers who sat on the sidelines when rates were higher are going to jump back in and make their moves happen. The graph below helps give you a visual of how this relationship works and where we are today:

As Lisa Sturtevant, Chief Economist for Bright MLS, explains:

“The higher rates we’re seeing now [are likely] going to lead more prospective buyers to sit out the market and wait for rates to come down.”

Why You Might Not Want To Wait

If you’re asking yourself: what does this mean for my move? Here’s the golden nugget. According to experts, mortgage rates are still projected to come down this year, just a bit later than they originally thought.

When rates come down, more people are going to get back into the market. And that means you’ll have a lot more competition from other buyers when you go to purchase your next home. That may make your move more stressful if you wait because greater demand could lead to an increase in multiple offer scenarios and prices rising faster.

But if you’re ready and able to sell now, it may be worth it to get ahead of that. You have the chance to move before the competition increases.

Bottom Line

If you’re thinking about whether you should wait for rates to come down before you move, don’t forget to factor in buyer demand. Once rates decline, competition will go up even more. If you want to get ahead of that and sell now, let’s chat.

Buying • April 15, 2024

Ways To Use Your Tax Refund If You Want To Buy a Home

by Rodney Ward

Have you been saving up to buy a home this year? If so, you know there are a number of expenses involved – from your down payment to closing costs. But did you also know your tax refund can help you pay for some of these expenses? As Credit Karma explains:

“If one of your goals is to stop renting and buy a home, you’ll need to save up for closing costs and a down payment on the mortgage. A tax refund can give you a start on the road to homeownership. If you’ve already started to save, your tax refund could move you down the road faster.”

While how much money you may get in a tax refund is going to vary, it can be encouraging to have a general idea of what’s possible. Here’s what CNET has to say about the average increase people are seeing this year:

“The average refund size is up by 6.1%, from $2,903 for 2023’s tax season through March 24, to $3,081 for this season through March 22.”

Sounds great, right? Remember, your number is going to be different. But if you do get a refund, here are a few examples of how you can use it when buying a home. According to Freddie Mac:

Saving for a down payment – One of the biggest barriers to homeownership is setting aside enough money for a down payment. You could reach your savings goal even faster by using your tax refund to help.
Paying for closing costs – Closing costs cover some of the payments you’ll make at closing. They’re generally between 2% and 5% of the total purchase price of the home. You could direct your tax refund toward these closing costs.
Lowering your mortgage rate – Your lender might give you the option to buy down your mortgage rate. If affordability is tight for you at today’s rates and home prices, this option may be worth exploring. If you qualify for this option, you could pay upfront to have a lower rate on your mortgage.

The best way to get ready to buy a home is to work with a team of trusted real estate professionals who understand the process and what you’ll need to do to be ready to buy.

Bottom Line

Your tax refund can help you reach your savings goal for buying a home. Let’s talk about what you’re looking for, because your home may be more within reach than you think.

Videos • April 12, 2024

The Perks of Downsizing

by Rodney Ward

All • April 12, 2024

Not the Direction We Were Looking For

by Rodney Ward

Freddie Mac released Thursday (04/11/2024) the results of its Primary Mortgage Market Survey ^® (PMMS^®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.88 percent.

“Mortgage rates have been drifting higher for most of the year due to sustained inflation and the reevaluation of the Federal Reserve’s monetary policy path,” said Sam Khater, Freddie Mac’s Chief Economist. “While newly released inflation data from March continues to show a trend of very little movement, the financial market’s reaction paints a far different economic picture. Since inflation decelerated from 9% to 3% between June 2022 and June 2023, the annual growth rate of inflation has remained effectively flat, ranging from 3.1% to 3.7% and averaging 3.3%. The March estimate of 3.5% annual growth is in the middle of that range. However, the market’s reaction was dramatically different, as illustrated by a significant drop in the Dow Jones Industrial Average post-announcement.”

Khater continued, “It’s clear that while the trend in inflation data has been close to flat for nearly a year, the narrative is much less clear and resembles the unrealized expectations of a recession from a year ago.”

The 30-year FRM averaged 6.88 percent as of April 11, 2024, up from last week when it averaged 6.82 percent. A year ago at this time, the 30-year FRM averaged 6.27 percent.
The 15-year FRM averaged 6.16 percent, up from last week when it averaged 6.06 percent. A year ago at this time, the 15-year FRM averaged 5.54 percent.

The PMMS^® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.

Instant Reaction: Dr. Jessica Lautz is the Deputy Chief Economist and Vice President of Research at the National Association of REALTORS®.

If one were to shake a Magic 8 ball, the answer to the question of “where are mortgage interest going to be in the next month?” would now read “outlook not so good.” Yesterday’s inflation figures, unfortunately, rose to 3.5%, which reverses the trend of lowering inflation. While yesterday showed a higher CPI reading and a jump in the 10-year treasury (the highest since November), the weekly average of mortgage interest rates remained in the mid-6% range at 6.88% as it has not yet fully factored in the jump. In the coming weeks, mortgage interest rates are likely to increase, which is disappointing news for Spring home buyers.

For a $400,000 home with a 10% down payment, the typical mortgage payment would be $2,366, which is out of reach for many Americans. While first-time buyers do not have housing equity to assist in their home purchase, those who have earned housing equity through home price appreciation are the current winners in today’s housing market. One-third of recent home buyers did not finance their home purchase last month—the highest share in a decade. For these buyers, interest rates may be less influential in their purchase decisions.

All • Buying • Selling • April 10, 2024

Should I Move with Today’s Mortgage Rates?

by Rodney Ward

When mortgage rates spiked up over the last few years, some homeowners put their plans to move on pause. Maybe you did too because you didn’t want to sell and take on a higher mortgage rate for your next home. But is that still the right strategy for you?

In today’s market, data shows more homeowners are getting used to where rates are and thinking it may be time to move. As Mark Zandi, Chief Economist at Moody’s Analytics, explains:

“Listings are up a bit as life events and job changes are putting increasing pressure on locked-in homeowners to sell their homes. Homeowners may also be slowly coming to the realization that mortgage rates aren’t going back anywhere near the rate on their existing mortgage.”

A recent study from Bank of America sheds light on some of the things homeowners say would make them sell, even with rates where they are right now (see visual below):

What Would Motivate You To Move?

Now that you know why other people would move, take a minute to think about what would make a move worth it for you. Is it time to take a chance and go for your dream job, even though it’s not local? Are you looking for a neighborhood that has more to offer and a close-knit sense of community? Maybe you just need more space, you’re looking for your next great adventure, or you want a house that opens up rental opportunities to pad your income.

And here’s something else to consider. Mortgage rates are still expected to go down over the course of the year. And once that happens, there’s going to be a big rush of buyers jumping back into the market. While you could delay your plans until rates drop, you’ll only have more competition with those buyers if you do.

So, does that mean it’s worth it to move now, even with rates where they are? The answer is: that it depends.

You’ll want to consider today’s mortgage rates, where they’re expected to go from here, and what would prompt you to want to make a change as you decide on your next steps. An expert can help with that.

Bottom Line

Other homeowners are getting used to rates and deciding to move. Let’s chat to go over what matters most to you and if it’s time for you to jump back into the market too.

Buying • April 5, 2024

Top 5 Reasons To Hire an Agent When Buying a Home

by Rodney Ward

Some Highlights

Hiring an agent when buying a home helps you understand the buying process and the local market.
They’ll also go over contracts and fine print with you, so you understand what you’re agreeing to. Plus, they’re good at negotiating, making sure you get the best deal.
Expert advice from a trusted real estate professional is priceless. Let’s connect today.

All • April 4, 2024

Mortgage Interest Rates Moving In A Narrow Range

by Rodney Ward

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey ^® (PMMS^®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.82 percent.

“Mortgage rates showed little movement again this week, hovering around 6.8 percent,” said Sam Khater, Freddie Mac’s Chief Economist. “Since the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either. While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term. On the plus side, inventory is improving somewhat, which should help temper home price growth.”

News Facts

The 30-year FRM averaged 6.82 percent as of April 4, 2024, up from last week when it averaged 6.79 percent. A year ago at this time, the 30-year FRM averaged 6.28 percent.
The 15-year FRM averaged 6.06 percent, down from last week when it averaged 6.11 percent. A year ago at this time, the 15-year FRM averaged 5.64 percent.

The PMMS^® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.

Here’s reaction to day’s rate news from Dr. Jessica Lautz Deputy Chief Economist and Vice President of Research at the National Association of REALTORS®.

Mortgage interest rates continue their now 17-week stay in the mid-6% range. While lower interest rates would improve affordability for potential buyers, knowing that those rates have stayed steady may make for a less fraught home shopping experience. Buyers know what to expect, and walking through potential homes remains a financially viable option. For a home buyer purchasing a $400,000 home at the current 30-year mortgage interest rate of 6.82%, with a 20% down payment, the mortgage payment would be $2,090. Down payments offset the mortgage payment. With a 35% down payment, as Older Baby Boomers had last year, the mortgage payment would be $1,698.

Homeowners continue to earn housing equity as home prices continue to increase. Potential sellers weighing the decision to move, even if they currently have a lower mortgage interest rate, may consult with experts to determine the down payment they are able to place on a new home. This calculation could prove favorable for many, especially if their home no longer works with a family or job change.

All • April 4, 2024

Boomers Moving Will Be More Like a Gentle Tide Than a Tsunami

by Rodney Ward

Have you heard the term “Silver Tsunami” getting tossed around recently? If so, here’s what you really need to know. That phrase refers to the idea that a lot of baby boomers are going to move or downsize all at once. And the fear is that a sudden influx of homes for sale would have a big impact on housing. That’s because it would create a whole lot more competition for smaller homes and would throw off the balance of supply and demand, which ultimately would impact home prices.

But here’s the thing. There are a couple of faults in that logic. Let’s break them down and put your mind at ease.

Not All Baby Boomers Plan To Move

For starters, plenty of baby boomers don’t plan on moving at all. A study from the AARP says more than half of adults aged 65 and older want to stay in their homes and not move as they age (see graph below):

While it’s true circumstances may change and some people who don’t plan to move (the red in the chart above) may realize they need to down the road, the vast majority are counting on aging in place.

As for those who stay put, they’ll likely modify their homes as their needs change over time. And when updating their existing home won’t work, some will buy a second home and keep their original one as an investment to fuel generational wealth for their loved ones. As an article from Inman explains:

“Many boomers have no desire to retire fully and take up less space . . . Many will modify their current home, and the wealthiest will opt to have multiple homes.”

Even Those Who Do Move Won’t Do It All at Once

While not all baby boomers are looking to sell their homes and move – the ones who do won’t all do it at the same time. Instead, it’ll happen slowly over many years. As Freddie Mac says:

“We forecast the ‘tsunami’ will be more like a tide, bringing a gradual exit of 9.2 million Boomers by 2035 . . .”

As Mark Fleming, Chief Economist at First American, says:

“Demographics are never a tsunami. The baby boomer generation is almost two decades of births. That means they’re going to take about two decades to work their way through.”

Bottom Line

If you’re stressed about a Silver Tsunami shaking the housing market overnight, don’t be. Baby boomers will move slowly over a much longer period of time.

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