Wondering What’s Going on with Home Prices?
The recent changes in home prices are top of mind for many as the housing market begins gearing up for spring. It can be hard to navigate misleading headlines and confusing data, so here’s what you should know about today’s home prices. Local price trends still vary by market. But looking at national data, Nataliya Polkovnichenko, Ph.D., Supervisory Economist at the Federal Housing Finance Agency (FHFA), explains: “U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.” Month-over-month home price changes can be seen in the chart below. The data also shows that price depreciation peaked around August. Since then, any depreciation has been even milder. In other words, today’s home prices aren’t in a freefall. What Does This Mean for You? If you own your house, you may be concerned about even the smallest price decline. But keep in mind how much home values have grown over the last few years. Compared to that growth, any national decreases are likely to be minimal. Selma Hepp, Chief Economist at CoreLogic, shares: “ . . . while prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring’s peak.” It’s also important to remember that every local market is different. That’s why it’s essential to lean on an expert for the latest home prices in your area if you plan to move this spring. Bottom Line To understand what’s going on with home prices in our market and how they could impact your goals, let’s connect today. Search for homes in your area What's my Home Worth?
The Two Big Issues the Housing Market’s Facing Right Now
The biggest challenge the housing market’s facing is how few homes there are for sale. Chief Economist at First American, Mark Fleming, explains the root causes of today’s low supply: “Two dynamics are keeping existing-home inventory historically low – rate-locked existing homeowners and the fear of not finding something to buy.” Let’s break down these two big issues in today’s housing market. Rate-Locked Homeowners According to the Federal Housing Finance Agency (FHFA), the average interest rate for current homeowners with mortgages is less than 4% (see graph below): But today, the typical mortgage rate offered to buyers is over 6%. As a result, many homeowners are opting to stay put instead of moving to another home with a higher borrowing cost. This is a situation known as being rate locked. When so many homeowners are rate locked and reluctant to sell, it’s a challenge for a housing market that needs more inventory. However, experts project mortgage rates will gradually fall this year, which could mean more people will be willing to move as that happens. The Fear of Not Finding Something To Buy The other factor holding back potential sellers is the fear of not finding another home to buy if they move. Worrying about where they’ll go has left many on the sidelines waiting for more homes to come to the market. That’s why you must consider all your options if you’re on the fence about selling. That includes newly built homes, especially when builders offer concessions like mortgage rate buydowns. What Does This Mean for You? These two issues keep the supply of homes for sale lower than pre-pandemic levels. But if you want to sell your house, today’s market is a sweet spot that can work to your advantage. Be sure to work with a local real estate professional to explore the options you have right now, which could include leveraging your current home equity. According to ATTOM: “ . . . 48 percent of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50 percent of their estimated market values.” This could make a significant difference when you move. You can work with a local real estate expert to learn how putting your equity to work can reduce your next home's cost. Bottom Line Rate-locked homeowners and the fear of not finding something to buy keep housing inventory low across the country. But as mortgage rates start to come down this year and homeowners explore all their options, we should expect more homes to come to the market. Search for homes in your area. Sell My Home
How To Make Your Dream of Homeownership a Reality
According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority, and 28 million Americans plan to buy within the next 12 months. Homeownership provides many financial and nonfinancial benefits, so interest is understandable. However, all 28 million Americans will unlikely accomplish that goal in the coming year. Experts project around five million homes will be sold in 2023. Why is there such a big difference? It’s partly because there can be challenges to buying a home. In the same survey, when asked, “Which of the following are preventing you from pursuing homeownership at this time?”: 34% answered, “I don’t have enough saved for a down payment.” 30% answered, “My credit score.” If you aim to buy a home, here’s what you need to know to accomplish that goal. Save for Your Down Payment Your down payment is a big chunk of what you pay upfront for your home. For most home purchases, buyers put down some amount of cash up front (a down payment) and then take out a loan (a mortgage) to pay for the rest. It’s a longstanding myth that you must pay 20% of the purchase price for your down payment. In reality, 20% down isn’t always required. In fact, according to the National Association of Realtors (NAR), today’s median down payment is 14% for the average buyer and just 6% for a first-time buyer. Regardless of how much money you can save for your down payment, know there’s help available. A local lender can show you options to help you get closer to your down payment goal. Plus, there are even loan types, like FHA loans, with down payments as low as 3.5% for some buyers, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants. Beyond assistance programs and different loan types, here are a few other tips to help you as you save for your down payment: Remember to factor in closing costs. In addition to your down payment, closing costs are usually 2-5% of the home’s purchase price. Maintain your savings. Your down payment shouldn’t deplete all your savings. It’s important to still have some money set aside for homeownership expenses after you move in. Explore your options and lean on your trusted advisor for expert guidance. Do your research, ask questions, and look into the resources available for buyers like you. Improve Your Credit Score Your credit score is a number that indicates how financially reliable you are to lenders. A higher credit score usually means you’ll be able to borrow more money at a better interest rate. If your credit score is preventing you from getting an affordable mortgage, there are steps you can take to improve it. Here are two: Pay your bills on time. When you pay your bills on time, your credit score improves. When you’re late, it takes a hit. One way to make paying your bills on time easier? Set up automatic payments when and where you can. Mix it up. From auto loans to credit cards to mortgages – there are several different types of credit. And having a mix of them improves your credit score. Bottom Line If you want to purchase a home this year, let’s connect so we can start preparing. Search for your dream home now!
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