Posts Tagged ‘higher mortgage rates’

Housing market subdued

March 14, 2023

Subdued. That’s how Fannie Mae’s chief economist describes consumer sentiment toward the housing market, as recorded in the enterprise’s latest Home Purchase Sentiment Index (HPSI).

To which I respond…. “Oh, really? I hadn’t noticed.”

For those of us in the real estate industry, it is pretty obvious the market is subdued. I get it. Home prices are high and not substantially coming down (if at all depending on your market area). Also rates remain stubbornly high compared to the past few years. It is easy to see how the market got subdued.

While the index increased in January for the third-consecutive month, it remained well below its pre-pandemic high.

One thing to note about this index, it looks at past actions/sentiment. The recent reading from early March included data collected in January. Meaning, the data is five weeks old at its time of release.

Something changed in late February and March. My phone began ringing more often. My clients are making offers on homes with multiple offers. A more “real time” analysis seems to show the market gaining some momentum. Perhaps rates jump over 7% again (they’ve tested 7% twice in the past several months, and both times moved back below 7% rather quickly) or another bank crashes and people get really nervous. It’s quite an interesting time out there!

Even with all of this happening, the Spring market is here. More people are out looking, and competition for the limited number of homes out there is beginning to increase. I’ll be interested to see the HSPI numbers later this year once we have the figures for March and April.

For those of you looking to purchase a home in the state of Georgia, contact me today! I can get you ready to make an offer in just a few minutes, and work toward getting your loan pre-underwritten to make your offer stronger in an increasingly crowded market.

First time home buyers are back

January 17, 2023

First-time homebuyers have returned to the housing market. The share of buyers purchasing a home for the first time rebounded to pre-pandemic levels, now representing 45% of all buyers (up from 37% in 2021 per Zillow’s 2022 Consumer Housing Trends Report).

This is primarily attributed to a cooling market, allowing new buyers to survey their housing options. The share of first-time buyers plummeted during the pandemic, as first-time buyers lost out to older, repeat buyers who were able to tap the equity in their existing homes and use cash to make a stronger offer.

This also feeds into my post from last week… less competition for homes makes it easier for first time home buyers to get into their own home!

“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” said Manny Garcia, a Zillow population scientist. “While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they’re comparing a monthly mortgage payment to what they’re paying in rent.”

As mentioned countless times on this blog, it is definitely cheaper to own than rent in Georgia!

A downside to this? While there are fewer buyers overall, first-time buyers may find more competition for starter homes. This trend will only worsen as the mood shifts to it being a “good time to buy a home.” No one knows when the sentiment will shift, but it will. Just look at how quickly the market cooled. Homes were flying off the market and then precipitously dropped from May to July. The housing market will come roaring back once people believe it is a good time to buy.

Given the current market, it is a good time to get ahead of the curve. Mortgage rates are higher now than in early 2022, but inventory levels are still tight. This means now is a great time to buy a home as the competition is lower than normal. If you are buying in the state of Georgia, contact me today. I can get you ready to make an offer on a home in just a few minutes!

Now is a great time to buy a home!

January 10, 2023

Happy New Year! Yes, 2023 is a great time to purchase a home. I am well aware if you do a search for “is now a good time to buy a home?,” one is likely to find plenty of articles saying now is a bad time to purchase. While there are many good points in these articles (I’ve read a lot of them), they all seem to be missing one important thing…


Or perhaps I should say, the lack of competition.

Follow with me for a moment… in 2020-2021, the market was crazy. Sellers were receiving 5, 10, 20+ offers on a home (one agent I know received over 100 on a listing!). The offers were always over (sometimes way over!) asking price. Every offer waived some contingencies, and most waived all of them. This means the buyer had no protection on their earnest money and had to buy the home “as is,” or forfeit their earnest money if they decided not to buy the home.

This isn’t a great way to buy a home. As we moved into mid and late 2022, the market shifted. Yes, there are still multiple offers on homes. Yet it is only a few offers on most homes. Properties are going under contract at/around list price, and buyers are getting contingencies on their contracts (not to mention sellers giving money to closing costs!).

There are many reasons to consider waiting to buy a home (rates are higher, home prices are high, inventory levels are low, a looming recession). Why should someone consider buying right now? To me, it is simply competition…

Many would-be buyers will sit this spring market out because everything they read says “now is a bad time to buy a home.” Let’s say the stories change this time next year. For example, prices have leveled out, mortgage rates have lowered, so 2024 is a great time to buy. Do you know what that means? Competition will be fierce! Buyers in my “spring market 2024” example would include:

  • Everyone who decided to push off buying a home in 2023 because it “isn’t a good time to buy a home.”
  • Everyone who planned on buying a home in 2024.
  • Some who planned to buy in 2025 or 2026 and decided to move up their timeline because “now is a good time to buy a home.”

When the mood shifts to now being a “great time to buy a home,” inventory levels will still be low. The supply-and-demand dynamics dragging inventory levels (too many buyers and too few homes available) isn’t going away anytime soon. The market will resemble to craziness of 2020-mid 2022.

Yes, mortgage rates are higher, but finding the right home is hard. It is way easier to refinance a home you already own versus fighting the crowd to get a home when rates are lower. I’ve bought two homes in my life, and refinanced them both.

Regardless of what is in the news, taking the long term view, now is a great time to buy a home. If you are buying in the state of Georgia, contact me today. I can get you ready to make an offer on a home in just a few minutes!

It’s no longer just about the jobs report

December 13, 2022

Until recently, all attention about the direction of the economy focused soley on the jobs report. Analysts made predictions and then analyzed where they got things wrong. Then there is the quarterly growth data (GDP). Together with the jobs report, the markets reacted until the next set of numbers were released.

Now we have another focus, and it involves inflation.

Now analysts are obsessing over the inflation numbers. The Consumer (CPI) and Producer (PPI) price reports are “where it is at” with the regard to influencing the stock and bond markets today. We are even reacting to inflation reports from Europe, because the entire world seems to be in a similar situation.

For example, last week, it was announced that the CPI increased by 7.7% annually, with the core number increasing by 6.3% annually. The core excludes the volatile components of food and energy. Overall, these numbers were seen as better than expected and the stocks and bond markets reacted very positively. Though this is only one month of data, it is hoped that this report represents the beginnings of the improvement we have been waiting for (and the reason for my post last month about the Federal Reserve moving too fast/perhaps need to slow down on rate hikes)

Today, market movement is all about inflation and the wide range of data gives analysts and the Fed plenty to chew upon.

Why are owners not listing homes?

November 8, 2022

Last week I mentioned inventory levels are higher now than they were a year ago. This is true, yet numbers can be deceiving. The Jacksonville Jaguars tripled their win total from 2020 to 2021. Sounds good, but if you only win one game in 2020, it is still a tough year with just three total wins the next season!

Our inventory story is similar. Yes, inventory levels were up 27% compared to a year ago. The reason they were up so much is that inventory levels were so incredibly low a year ago. In addition to the fear of not finding their next home, now there is another reason current home owners are reluctant to list their homes.

With mortgage interest rates going as high as 7 percent this year, a growing number of homeowners are reluctant to sell because they have a lower rate on their current mortgage. The historically low interest rates we saw in 2020 and 2021 is keeping many homes on the sidelines.

There are some stories out there about home values dropping. As with most things, what does the local Georgia picture look like?

Sure, prices have fallen in some markets. In Georgia, values thus far have remained stable. In a time where the number of purchases is slowing, the low supply of homes is keeping home prices relatively high – simple supply and demand.

For those who already own a home, this is good news. You are likely to have seen the home noticeably appreciate while enjoying a low interest rate. For individuals who do not already own a home, homeownership is moving further out of reach for some as rising rates, elevated home prices and the persisting housing shortage make buying a house more expensive.

Eventually this trend will change. The number of homes sold in 2014 was also low, yet the housing market saw a boom in 2015-2016 in terms of a jump in sales. After years of not buying a home, the market went into overdrive. A similar thing will happen in the current environment too. Homeowners may be reluctant to sell with higher rates, but they will need a new home for changing needs… have a lot of equity in their current home… and jump into the market to use their equity on a new home purchase.

The question is “when” will this happen? The housing market was booming until about June 2022, and then it shut off – seemingly overnight! The ramp up will also be quick – when it happens. This is why buy a home now will be easier due to less competition out looking for homes. I’ve said it often lately, and I’ll say it again… finding the right home is hard. Refinancing to a lower rate later is easy. The experience of buying a home now in a higher interest rate market should be more “enjoyable” than when everyone decides it is time to move.

Ready to own a home in Georgia? If yes, contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!

Rents still rising

November 1, 2022

Rents hit another high over the summer according to a new report from Redfin. The national median asking rent price went up 14% year over year to $2,032. Some good news (if you can call it that) is on a monthly basis, the median rent only inched up 0.6% – the slowest growth since February.

Overall, asking rents have risen more than 30% in some of the 50 largest markets and they will continue to increase in markets with strong job growth and limited housing construction.

Why is the rental market in such a tight squeeze? Well, one of the reasons for the rental market is the same as the purchase market.

Decades worth of under-building have pushed inventory levels near record lows. Yes, the supply of homes for sale increased 27% at the start of September compared with a year ago (per Yet, active inventory of for-sale homes remained 43% lower than it was in 2019.

The lack of inventory has kept home prices high and out of reach for some buyers struggling to enter the market. “We had a housing shortage before the pandemic” Yun said, “…and then it worsened during the pandemic as people went rampant in terms of purchasing properties.”

Sidelined buyers have had no other choice but to rent. The problem? Rent prices have been skyrocketing as well, as landlords capitalize on the growth in demand. This isn’t the case everywhere in the U.S., but it is cheaper to own that rent in metro Atlanta. The number of buyers out looking is significantly lower than earlier this year. Yes, interest rates are higher. While finding the right home can be hard, refinancing to a lower interest rate in the future isn’t. Rates will lower at some point

Ready to own a home in Georgia? If yes, contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!

Rates are higher. Now what?

October 11, 2022

We all know rates of all types have moved higher. It is all over the news, savings accounts at banks are paying more interest to the account holders, car loan rates are up, home loan rates are up, and the housing market has slowed… yup, rates are higher.

So now what?

Last week I mentioned how the housing market is returning to historical norms. Well so too are mortgage rates. Take a look at mortgage rates over the past 50 years:

Even with a rate in the 6% range, rates are still lower than the historical average since the 1970s. I do not mean to sound flippant. I know it is a struggle when would be buyers have lost 20% of their purchasing power this year due to higher rates. I know it is hard out there.

We are accustomed to lower rate as they’ve been pretty low since the housing crash in 2008, and it is hard transitioning to where rates are today. So this is what I am telling clients now as we navigate higher interest rates – the home is long term. Interest rates are not.

Find the right home and buy it, own it, and live in it. While double digit annual appreciation is gone, homes still appreciate in value. Even when we saw the housing crash, home values came back (and a big crash like that has only happened twice… once during the Great Depression in the 1930s and the other from the housing crash).

Rates change and fluctuate. Look back at the chart in this post. Year over year, rates move up and down. I’ve owned two homes in my life and I’ve refinanced each of the homes (one of the homes I refinanced twice).

For roughly two years people were willing to go way over asking price, waive all contingencies and home inspections, offer to cover appraisal gaps, etc. Now homes are going at (and sometimes less than) their list price. There is less competition out there looking to buy. Sellers are giving money for closing costs, and buyers have contingencies and protections in their contracts again.

Yes, rates are higher, but buying a home is easier now than it was just a few months ago! Finding the right home is hard and a long term decision. The interest rate isn’t permanent and one can refinance to a lower rate to take advantage of a rate dip, and it will happen at some point in time.

When comparing the two, finding the right home is hard; whereas getting a new interest rate is easy.

For those looking to buy a home in the state of Georgia , contact me today to get started. I can have you well on your way to being ready to own your new home.

Housing market closer to historical norms

October 4, 2022

Recent data shows the housing market is slowing to more of historical norm in terms of the number of sales. The numbers through most of the summer shows a decline month over month and also a decline of roughly 15% from 2021.

“Slowing sales are a symptom of a housing market that’s coming off a two-year pandemic-influenced frenzy and settling into a pace that’s more in line with historical norms,” according to Mark Fleming, chief economist at First American. 

To be clear, the decline is not a crash, but rather an adjustment back to normal. What began this trend? You guessed it, higher mortgage rates.

Buyers are adjusting to the new world of higher mortgage rates. While median household income increased over the past two years, it isn’t enough to offset mortgage rates jumping by over 3% from their historical lows. The result is an over 20% decline in purchasing power (and I am not even considering the impact of inflation in those figures).

Combining higher rates, a loss of purchase power, inflation, and the fears of a looming recession, some would be buyers and current home owners are staying out of the market. Since home sellers are also prospective home buyers, homeowners choosing not to sell is also reducing housing market potential.

One thing to keep in mind is this… homeowners today have record levels of equity. As their equity grows, current home owners are more likely to consider using that equity to purchase another home that better suits their needs regardless of the interest rate. At some point, as it always does, the housing market will pick back up again.

This is the dichotomy potential buyers are weighing… should one buy now when homes are going closer to (or less than) list price, sellers are giving money to closing costs again, and buyers have time for inspections but with a higher rate, or wait until the mortgage rate market improves? More on this next week…

Housing prices should level off

June 21, 2022

Housing affordability has become a key concern in the real estate market, amid rising mortgage rates and double-digit annual house appreciation. The average monthly payment is 50% higher than a year ago! Those rising costs are sidelining more aspiring home buyers.

Signs are surfacing that the housing market could be slowing, and that could put less pressure on home prices. For the fourth consecutive month, sales of new homes dropped, reaching their lowest level since the pandemic. Existing-home sales also decreased in April, falling for the third consecutive month and down nearly 6% compared to a year ago, according to National Association of REALTORS® data.

These trends should offer some hope for buyers. The drop in sales should equate to less competition for buyers who are eager to buy yet keep getting beat out on offers. We may also see the trend of remote work continue – for instance, relocating to an area offering homes that meet their needs without breaking their budgets. 

Yes, rates are higher. Yet for those who need to move and couldn’t get under contract due to intense competition, the current trends do offer hope of a calming market (in terms of the number of buyers and home values slowing down).

Buyers getting discouraged

June 7, 2022

It’s been a seller’s market for many years now. It started as early as 2018 in some purchase price point areas – mainly first time home buyer price points back in 2018. It soon spread throughout the market, and became just as an extreme of a seller’s market as it was a buyer’s market during the housing crash well over a decade ago.

I can understand why buyers are frustrated and discouraged:

  • The easy one, I see it every day with my job and talking to buyers.
  • Home values continue to increase and are up by 7% (or more) year to date in some markets.
  • Mortgage rates are on the rise and have risen above 5% for the first time in many, many years.
  • Home affordability is close to an all time low. Combine the rising home values from the past few years with interest rates at 5%, and we’ve almost past the all time level for worst home affordability set in 2006.

While there are many things to be discouraged over, there are some positive signs:

  • As of this post, mortgage rates have calmed down. Rates shot up in Feb/Mar/Apr to their current highs. While rates are definitely higher now than at the start of the year, they have – for now – got into a steadier range.
  • Homes are now sitting longer on the market, and we are seeing more and more price reductions on listed homes.
  • The last several contracts my clients won included a sufficient amount of days for due diligence, the appraisal contingency and financing contingency.
  • Most importantly, more inventory is on the way from two sources:
    • A survey found 64% of respondents looking to sell their home by the end of the summer. Pandemic related delays are coming to an end, and people are going ahead with plans to move.
    • Forbearance programs are over. Homeowners have a lot of equity in their homes so expect people to look to sell a home they can’t afford to gain the equity out of it rather than allowing the home to go into foreclosure. This isn’t 2008!

It is still a seller’s market, yet signs show the market beginning to balance. I’ve been telling my clients to hang in there as signs are pointing to things easing up for buyers looking for their new home!