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Rising interest rates have begun to slow an overheated housing market as monthly mortgage payments have risen dramatically since the beginning of the year. This is leaving some people who want to purchase a home priced out of the market and others wondering if now is the time to buy one. But this rise in borrowing cost shows no signs of letting up soon.
Economic uncertainty and the volatility of the financial markets are causing mortgage rates to rise. George Ratiu, Senior Economist and Manager of Economic Research at realtor.com, says this:
“While even two months ago rates above 7% may have seemed unthinkable, at the current pace, we can expect rates to surpass that level in the next three months.”
So, is now the right time to buy a home? Anyone thinking about buying a home today should ask themselves two questions:
There are two places to turn to answer this question. First is the consensus of what experts are saying. If you look at what experts are projecting for home prices in 2023, they’re forecasting home price appreciation around 2%. While it’s true some are calling for depreciation, most are calling for appreciation in home values over the next year.
The second spot to turn to for information is the Home Price Expectation Survey from Pulsenomics – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists. According to the latest release, the experts surveyed are also calling for home price appreciation for the next several years (see graph below):
Like mentioned above, Ratiu sees mortgage rates rising over the next several months. Another expert agrees. Mark Fleming, Chief Economist at First American, says:
“While mortgage rates are expected to continue to drift higher over the coming months, much of the rapid increase in rates is likely behind us.”
The instability in the world and higher inflation are driving this volatile market, resulting in higher borrowing rates for those looking to buy homes.
If you’re thinking about buying a home, asking yourself about home prices and mortgage rates will help you make a powerful and confident decision. Experts see both prices and rates rising in the future. The alternative is to rent, but rents are also increasing. That may mean buying a home makes more sense than renting.
Today’s cooling housing market, the rise in mortgage rates, and mounting economic concerns have some people questioning: should I still buy a home this year? While it’s true this year has unique challenges for homebuyers, it’s important to factor the long-term benefits of homeownership into your decision.
Consider this: if you know people who bought a home 5, 10, or even 30 years ago, you’re probably going to have a hard time finding someone who regrets their decision. Why is that? The reason is tied to how you gain equity and wealth as home values grow with time.
The National Association of Realtors (NAR) explains:
“Home equity gains are built up through price appreciation and by paying off the mortgage through principal payments.”
Here’s a look at how just the home price appreciation piece can really add up over the years.
Even though home price appreciation has moderated this year, home values have still increased significantly in recent years. The map below uses data from the Federal Housing Finance Agency (FHFA) to show just how noteworthy those gains have been over the last five years.
If you look at the percent change in home prices, you can see home prices grew on average by almost 64% nationwide over that period.
That means a home’s value can increase substantially in a short time. And if you expand that time frame even more, the benefit of homeownership and the drastic gains you stand to make become even clearer (see map below):
The second map shows, nationwide, home prices appreciated by an average of over 290% over roughly a thirty-year span.
While home price growth varies by state and local area, the nationwide average tells you the typical homeowner who bought a house thirty years ago saw their home almost triple in value over that time. This is why homeowners who bought their homes years ago are still happy with their decision.
Even if home price appreciation eases as the market cools this year, experts say home prices are still expected to appreciate nationally in 2023. That means, in most markets, your home should grow in value over the next year even if the pace is slower than it was during the peak market frenzy when prices skyrocketed.
The alternative to buying a home is renting, and rental prices have been climbing for decades. So why rent and fight annual lease hikes for no long-term financial benefit? Instead, consider buying a home. It’s an investment in your future that could set you up for long-term gains.
Don’t let the shifting market delay your dreams. Data shows home values typically appreciate over time, and that gives your net worth a nice boost. If you’re ready to start your journey to homeownership, let’s connect today.
Mortgage rates have increased significantly in recent weeks. And that may mean you have questions about what this means for you if you’re planning to buy a home. Here’s some information that can help you make an informed decision when you set your homebuying plans.
As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here’s how it works.
Let’s assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is $389,500). If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.
As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That’s why it’s important to work with a real estate advisor to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts.
The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says this about where rates could go from here:
“Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.”
So, if you’re waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get inflation under control.
And if you’re considering renting as your alternative while you wait it out, remember that’s going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:
“There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.”
Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you’re going to be paying more. The difference is, with homeownership, you’re also gaining equity over time which will help grow your net worth. The question now becomes: what makes more sense for you?
Each person’s situation is unique. To make the best decision for you, let’s connect to explore your options.
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Some people believe there’s a group of homeowners who may be reluctant to sell their houses because they don’t want to lose the historically low mortgage rate they have on their current home. You may even have the same hesitation if you’re thinking about selling your house.
Data shows 51% of homeowners have a mortgage rate under 4% as of April this year. And while it’s true mortgage rates are higher than that right now, there are other non-financial factors to consider when it comes to making a move. In other words, your mortgage rate is important, but you may have other things going on in your life that make a move essential, regardless of where rates are today. As Jessica Lautz, Vice President of Demographics and Behavioral Insights at the National Association of Realtors (NAR), explains:
“Home sellers have historically moved when something in their lives changed – a new baby, a marriage, a divorce or a new job. . . .”
So, if you’re thinking about selling your house, it may help to explore the other reasons homeowners are choosing to make a move today. The 2022 Summer Sellers Survey by realtor.com asked recent home sellers why they decided to sell. The visual below breaks down how those homeowners responded:
As the visual shows, an appetite for different features or the fact that their current home could no longer meet their needs topped the list for recent sellers. Additionally, remote work and whether or not they need a home office or are tied to a specific physical office location also factored in, as did the desire to live close to their loved ones.
The realtor.com survey summarizes the findings like this:
“The primary reason homeowners decided to sell in the last year was the realization that, after so much time spent at home, they wanted different features and amenities, such as walkability, outdoor space, pool, etc. . . . ”
If you, like the homeowners they surveyed, find yourself wanting features, space, or amenities your current home just can’t provide, it may be time to consider listing your house for sale.
Even with today’s mortgage rates, your lifestyle needs may be enough to motivate you to make a change. The best way to find out what’s right for you is to partner with a trusted real estate professional who can provide expert guidance and advice throughout the process. They can help walk you through your options, so you can make a confident decision based on what matters most to you and your loved ones.
While the financial reasons for moving are important, there’s often far more to consider. Non-financial reasons can also be a significant motivating factor. If you need help weighing the pros and cons of selling your house, let’s connect today.
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If you’re thinking about buying a home today, there’s welcome news. Even though it’s still a sellers’ market, it’s a more moderate sellers’ market than last year. And the days of feeling like you may need to waive contingencies or pay drastically over asking price to get your offer considered may be coming to a close.
Today, you should have less competition and more negotiating power as a buyer. That’s because the intensity of buyer demand and bidding wars is easing this year. So, if bidding wars were the biggest factor that had you sitting on the sidelines, here are two trends that may be just what you need to re-enter the market.
Over the last two years, more buyers were willing to skip important steps in the homebuying process, like the appraisal or inspection, to try to win a bidding war. But now, fewer people are waiving the inspection and appraisal.
The latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving their home inspection and appraisal is declining. And a recent survey from realtor.com confirms more sellers are accepting offers that include these conditions today. According to their August study:
This goes to show buyers are more able to include these conditions in their offers today and negotiate as needed based on the outcome of the inspection.
Generally, closing costs range between 2% and 5% of the purchase price for the home. Before the pandemic, it was a common negotiation tactic for sellers to cover some of the buyer’s closing costs to sweeten the deal. This didn’t happen as much during the peak buyer frenzy over the past two years.
Today, as the market shifts and demand slows, data from realtor.com suggests this is making a comeback. A recent article shows 32% of sellers paid some or all of their buyer’s closing costs. This may be a negotiation tool you’ll see as you go to purchase a home. Just keep in mind, limits on closing cost credits are set by your lender and can vary by state and loan type. Work closely with your loan advisor to understand how much a seller can contribute to closing costs in your area.
Regardless of the extremely competitive housing market of the past several years, today’s data suggests negotiations are starting to come back on the table. This is good news if you’re planning to enter the housing market. To find out how the market is shifting in our area, let’s connect.
It’s clear the 2022 housing market has been defined by rising mortgage rates. With rates on the rise, it’s also become more costly to purchase a home. According to the National Association of Realtors (NAR):
“Compared to one year ago, the monthly mortgage payment rose to $1,944 from $1,265, an increase of 53.7%.”
If you’re thinking of buying a home or have been trying to recently, that’s a big increase in a monthly mortgage payment – and it may be causing you to press pause on your plans. This jump is making homes less affordable, especially compared to the last two years when mortgage rates were at historic lows.
The good news is you can navigate today’s housing market and this rising rate environment with a few simple tips. Here are three things you may want to consider to help make your homeownership goals a reality.
If you’ve been looking for a home in the city center or a specific area that’s starting to feel out of your price range, you may want to try looking a little further out in a location that could be more affordable. Expanding your search location or re-prioritizing the items on your wish list can open up opportunities you haven’t considered, and that could help you afford more of what you need (and want) in a home. As CNET notes:
“Area growth is likely to keep pace with the market, which means that the outskirts of town might be hopping within five years. Consider stepping out of your ideal location by searching in the nearby cities. You may find better prices and more square footage.”
Working with a trusted lender to learn about the different loan types and options is essential too. According to Nerd Wallet:
“A variety of mortgages are available with varying down payment and eligibility requirements.”
Experts know how to point you in the right direction when it comes to exploring ways to find the best home loan for your situation. With rising mortgage rates making it more costly to finance a home today, there may be an ideal option out there your loan officer can introduce you to. This could make a home purchase more affordable and within your financial reach over the life of your loan.
There are also many options available when it comes to securing the funding you need to purchase a home. One valuable resource to explore is downpaymentresource.com. Searching for specific down payment assistance options available in your local community could be a game changer when it comes to taking your first step toward homeownership. As NAR indicates:
“Many local governments and non-profit organizations offer down-payment assistance grants and loans, targeted to area borrowers and often with specific borrower requirements.”
Plus, there are programs and special benefits for individuals working in certain professions or with unique statuses, including teachers, doctors and nurses, and veterans.
Ultimately, that means there are many federal, state, and local programs available for you to explore. The best way to do that is to connect with a local real estate professional and your lender to learn more about what’s available in your area.
If you’ve been searching for a home and have found yourself stepping out of the process because you’re worried about rising costs, let’s connect. Having a team of local advisors on your side may be just what you need to guide your search in a new and more affordable direction.
There’s no denying the housing market is undergoing a shift this season as buyer demand slows and the number of homes for sale grows. But that shift actually gives you some unique benefits when you sell. Here’s a look at the key opportunities you have if you list your house this fall.
One of the biggest stories today is the growing supply of homes for sale. Housing inventory has been increasing since the start of the year, primarily because higher mortgage rates helped cool off the peak frenzy of buyer demand. But what you may not realize is, that actually could benefit you.
If you’re selling your house to make a move, it means you’ll have more options for your own home search. That gives you an even better chance to find a home that checks all of your boxes. So, if you’ve put off selling because you were worried about being able to find somewhere to go, know your options have improved.
Just remember, while data shows the number of homes for sale has increased this year, housing supply is still firmly in sellers’ market territory. To be in a balanced market where there are enough homes available to meet the pace of buyer demand, there would need to be a six months’ supply of homes. According to the latest report from the National Association of Realtors (NAR), in July, there was only a 3.3 months’ supply.
While you’ll have more options for your own home search, inventory is still low, and that means your home will still be in demand if you price it right. That’s why the most recent data from NAR also shows the average home sold in July still saw multiple offers and sold in as little as 14 days.
The home price appreciation the market saw over the past few years has likely given your equity (and your net worth) a considerable boost. Danielle Hale, Chief Economist at realtor.com, explains:
“Home owners trying to decide if now is the time to list their home for sale are still in a good position in many markets across the country as a decade of rising home prices gives them a substantial equity cushion . . .”
If you’ve been holding off on selling because you’re worried about how rising prices will impact your next home search, rest assured your equity can help. It may be just what you need to cover a large portion (if not all) of the down payment on your next home.
If you’re thinking about selling your house this season, let’s connect so you have the expert insights you need to make the best possible move today.
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