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Hang In There If You’re Trying to Buy A Home
We’re still in a sellers’ market. And if you’re looking to buy a home, that means you’re likely facing some unique challenges, like difficulty finding a home and volatile mortgage rates. But keep in mind, there are some benefits to being a buyer in today’s market that give you good reason to stick with your search. Here are a few of them.
Long-Term Benefits Outweigh Short-Term Challenges
Owning a home grows your net worth – and since building that wealth takes time, it makes sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity. Freddie Mac puts it this way:
“Homeownership not only builds a sense of pride and accomplishment, but it’s also an important step toward achieving long-term financial stability.”
The key there is long-term because the financial benefits homeownership provides, like home value appreciation and equity, grow over time. Those benefits are worth the short-term challenges today’s sellers’ market presents.
Mortgage Rates Are Constantly Changing
Mortgage rates have been hovering around 6.5% over the last several months. However, as Sam Khater, Chief Economist at Freddie Mac, notes, they’ve been coming down some recently:
“Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market . . .”
Lower mortgage rates improve your purchasing power when you buy, and that can help make homeownership more affordable. Hannah Jones, Economic Data Analyst at realtor.com, explains:
“As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”
The recent drop in mortgage rates is good news if you couldn’t afford to buy a home when they peaked.
Home Prices Will Increase
According to the Home Price Expectation Survey, which polls over 100 real estate experts, home values will go up steadily over the next few years after a slight decline this year (see graph below):
Rising home prices in the coming years means two things for you as a buyer:
- Waiting to buy a home could mean it’ll become more expensive to do so.
- Buying now means the value of your home, and your net worth, will likely grow over time.
Bottom Line
If you’ve been trying to buy a home, hang in there. Mortgage rates have ticked down some recently, home prices are forecast to increase in the coming years, and the long-term benefits of homeownership outweigh many of the short-term challenges.
30-year fixed Mortgage Rate Trends Down to 6.28%
Freddie Mac, the government-sponsored mortgage giant, has released the results of its Primary Mortgage Market Survey® (PMMS®), revealing that the 30-year fixed-rate mortgage (FRM) averaged 6.28 percent as of April 6, 2023. This marks a decline from last week when it averaged 6.32 percent, and a significant increase from a year ago when the 30-year FRM averaged 4.72 percent.
Sam Khater, Freddie Mac’s Chief Economist, noted that mortgage rates are continuing to trend down as the traditional spring homebuying season begins. However, he also highlighted the challenges faced by potential homebuyers, particularly first-time homebuyers, due to the low inventory of homes for sale in the market.
According to Lawrence Yun, Chief Economist of the National Association of Realtors (NAR), the decline in mortgage rates over the past four weeks is a positive development for homebuyers. Compared to the recent peak of 7% average rate, the current rate of 6.28% can save a homebuyer $140 per month on a $300,000 loan.
Yun also pointed out that the fallout from regional bank collapses has led to tightening lending conditions in some areas, but residential mortgages, including VA, FHA, and conforming mortgages, continue to have government guarantees, which ensure a steady appetite for these loans.
The longer-term prospect on mortgage rates is also positive, with the possibility of rates going under 6% by the end of the year. Yun attributed this to the steady supply of new apartments hitting the market, which will limit rent growth and overall consumer price inflation, leading to the Federal Reserve potentially stopping its tightening policy. Lower rates are expected to attract more homebuyers, but it is crucial to ensure an increase in housing supply to meet the recovering demand.
Overall, the declining trend in mortgage rates is good news for potential homebuyers, but challenges such as low inventory and tightening lending conditions remain. It will be important to monitor how these factors evolve in the coming months and their impact on the housing market.
Will Home Prices Crash?
There have been a lot of shifts in the housing market recently. Mortgage rates rose dramatically last year, impacting many people’s ability to buy a home. And after several years of rapid price appreciation, home prices finally peaked last summer. These changes led to a rise in headlines saying prices would end up crashing.
Even though we’re no longer seeing the buyer frenzy that drove home values up during the pandemic, prices have been relatively flat at the national level. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), doesn’t expect that to change:
“[H]ome prices will be steady in most parts of the country with a minor change in the national median home price.”
You might think sellers would have to lower prices to attract buyers in today’s market, and that’s part of why some may have been waiting for prices to come crashing down. But there’s another factor at play – low inventory. And according to Yun, that’s limiting just how low prices will go:
“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
As you can see in the graph below, we’ve been at or near record-low inventory levels for a few years now.
That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this:
“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”
If more homes don’t come to the market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, inventory isn’t likely to rise significantly this year:
“I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.”
Sellers are under no pressure to move since they have plenty of equity right now. That equity acts as a cushion for homeowners, lowering the chances of distressed sales like foreclosures and short sales. And with many homeowners locked into low mortgage rates, that equity cushion isn’t going anywhere soon.
With so few homes available for sale today, it’s important to work with a trusted real estate agent who understands your local area and can navigate the current market volatility.
Bottom Line
A lot of people expected prices would crash this year thanks to low buyer demand, but that isn’t happening. Why? There aren’t enough homes for sale. If you’re thinking about moving this spring, let’s connect.
Should You Sell Your House Now?
Here’s Two Reasons You Should Sell Your House.
Wondering if you should sell your house this year? As you make your decision, think about what’s motivating you to consider moving. A recent survey from realtor.com asked why homeowners are thinking about selling their houses this year. Here are the top two reasons (see graphic below):
Let’s break those reasons down and explore how they might resonate with you.
1. I Want To Take Advantage of the Current Market and Make a Profit
When you decide to sell your house, how much you’ll make from the sale will likely be top of mind. So, here’s some good news: according to the latest data, the average seller can expect a strong return on their investment when they make a move. ATTOM explains:
“The $112,000 profit on median-priced home sales in 2022 represented a 51.4% return on investment compared to the original purchase price, up from 44.6% last year and from 32.8% in 2020.”
Even though home prices have declined slightly in some markets, they’re still much higher overall than they were just a few years ago. To understand what’s happening with home prices in your area and the current value of your house, work with a local real estate professional. They can give you the best advice on how much you could gain if you sell this year.
2. My Home No Longer Meets My Needs
The average person has been in their house for ten years. That’s a long time when you think about how much may have changed in your life since you moved in. And typically, those changes have a direct impact on what you need in a home. Whether it’s more (or less) space, different features, or a location closer to your work or loved ones, your current house may no longer check all the boxes of what feels like home to you. If that’s the case, it could be time to work with a real estate agent to find a better fit.
Bottom Line
If you’re thinking about selling your house, there’s probably a good reason for it. Let’s connect so you can make a move that’ll help you accomplish your goals this year.
Mortgage Rate Changes and You
How Changing Mortgage Rates Can Affect You
The 30-year fixed mortgage rate has been bouncing between 6% and 7% this year. If you’ve been on the fence about whether to buy a home or not, it’s helpful to know exactly how a 1%, or even a 0.5%, mortgage rate shift affects your purchasing power.
The chart below helps show the general relationship between mortgage rates and a typical monthly mortgage payment:
Even a 0.5% change can have a big impact on your monthly payment. And since rates have been moving between 6% and 7% for a while now, you can see how it impacts your purchasing power as rates go down.
What This Means for You
You may be tempted to put your homebuying plans on hold in hopes that rates will fall. But that can be risky. No one knows for sure where rates will go from here, and trying to time them for your benefit is tough. Lisa Sturtevant, Housing Economist at Bright MLS, explains:
“It is typically a fool’s errand for a homebuyer to try to time rates in this market . . . But volatility in mortgage rates right now can have a real impact on buyers’ monthly payments.”
That’s why it’s critical to lean on your expert real estate advisors to explore your mortgage options, understand what impacts mortgage rates, and plan your homebuying budget around today’s volatility. They’ll also be able to offer advice tailored to your specific situation and goals, so you have what you need to make an informed decision.
Bottom Line
Your ability to buy a home could be impacted by changing mortgage rates. If you’re thinking about making a move, let’s connect so you have a strong plan in place.
Facts You Should Know About Closing Costs
Some Highlights
- If you’re thinking about buying a home, be sure to plan for closing costs.
- Closing costs are typically 2% to 5% of the total purchase price of a home, and they can include things like government recording costs, appraisal fees, and more.
- Let’s connect so I can answer your questions about the homebuying process.
Are We in a Sellers’ Market? What Does That Mean?
Even though activity in the housing market has slowed from the frenzy we saw over a year ago, today’s low supply of homes for sale is still a sellers’ market. But what does that really mean? And why are conditions today so good if you want to list your house?
It starts with the number of homes available for sale. The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still astonishingly low. Today, we have a 2.6-month supply of homes at the current sales pace. Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (see graph below):
What Does This Mean for You?
When the supply of homes for sale is as low as it is right now, it’s much harder for buyers to find one to purchase. That creates increased competition among purchasers and keeps upward pressure on prices. And if buyers know they’re not the only one interested in a home, they’re going to do their best to submit a very attractive offer. As this happens, sellers are positioned to negotiate deals that meet their ideal terms. Lawrence Yun, Chief Economist at NAR, says:
“Inventory levels are still at historic lows. Consequently, multiple offers are returning on a good number of properties.”
Right now, there are still buyers who are ready, willing, and able to purchase a home. If you list your house right now in good condition and at the right price, it could get a lot of attention from competitive buyers.
Bottom Line
Today’s sellers’ market holds great opportunities for homeowners ready to make a move. Listing your house now will maximize your exposure to serious, competitive buyers. Let’s connect to discuss how to jumpstart the selling process.
