Facebook
X
Pinterest
Copy Link
Expert Quotes on the Fall Housing Market
Two Reasons Why Waiting a Year To Buy Could Cost You
If you’re a renter with a desire to become a homeowner, or a homeowner who’s decided your current house no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
- What will home prices be like in 2022?
- Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
- Freddie Mac: 5.3%
- Fannie Mae: 5.1%
- Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
- Freddie Mac: 3.8%
- Fannie Mae: 3.2%
- Mortgage Bankers Association: 4.2%
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
Bottom Line
When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Remote Work Is Here To Stay. Can Your Home Deliver the Space You Need?
A lot has changed over the past year. For many people, the rise in remote work influenced what they’re looking for in a home and created a greater appetite for a dedicated home office. Some professionals took advantage of the situation and purchased a bigger home. Other people thought working from home would be temporary, so they chose to get creative and make the space they already had work for them. But recent headlines indicate working from home isn’t a passing fad.
If you’re still longing for a dedicated home office, now may be the time to find the home that addresses your evolving needs. More and more companies are delaying their plans to return to the office – others are deciding to remain fully remote permanently.
Other experts agree. A survey conducted by Upwork of 1,000 hiring managers found that due to the pandemic, companies were planning more remote work now and in the years to come. Upwork elaborates:
“The number of remote workers in the next five years is expected to be nearly double what it was before COVID-19: By 2025, 36.2 million Americans will be remote, an increase of 16.8 million people from pre-pandemic rates.”
The charts below break down their findings and compare pre and post-pandemic percentages.
How Does This Impact Homeowners?
If you own your home, it’s important to realize that continued remote work may give you opportunities you didn’t realize you had. Since you don’t need to be tied to a specific area for your job, you have more flexibility when it comes to where you can live.
If you’re one of the nearly 23% of workers who will remain 100% remote:
You have the option to move to a lower cost-of-living area or to the location of your dreams. If you search for a home in a more affordable area, you’ll be able to get more home for your money, freeing up more options for your dedicated office space and additional breathing room.
You could also move to a location where you’ve always wanted to live – somewhere near the beach, the mountains, or simply a market that features the kind of weather and community amenities you’re looking for. Without your job tying you to a specific location, you’re bound to find your ideal spot.
If you’re one of the almost 15% of individuals who will have a partially remote or hybrid schedule:
Relocating within your local area to a home that’s further away from your office could be a great choice. Since you won’t be going in to work every day, a slightly longer commute from a more suburban or rural neighborhood may be a worthy trade-off for a home with more features, space, or comforts.
Homeownership Is Still Affordable
Even with today’s growing home price appreciation, homeownership is still affordable. Let’s connect to make your homeownership goals a reality.
Is the Number of Homes for Sale Finally Growing?
An important metric in today’s residential real estate market is the number of homes available for sale. The shortage of available housing inventory is the major reason for the double-digit price appreciation we’ve seen in each of the last two years. It’s the reason many would-be purchasers are frustrated with the bidding wars over the homes that are available. However, signs of relief are finally appearing.
According to data from realtor.com, active listings have increased over the last four months. They define active listings as:
“The active listing count tracks the number of for sale properties on the market, excluding pending listings where a pending status is available. This is a snapshot measure of how many active listings can be expected on any given day of the specified month.”
What normally happens throughout the year?
Historically, housing inventory increases throughout the summer months, starts to tail off in the fall, and then drops significantly over the winter. The graph below shows this trend along with the month active listings peaked in 2017, 2018, and 2019.
What happened last year?
Last year, the trend was different. Historical seasonality wasn’t repeated in 2020 since many homeowners held off on putting their houses up for sale because of the pandemic (see graph below). In 2020, active listings peaked in April, and then fell off dramatically for the remainder of the year.
What’s happening this year?
Due to the decline of active listings in 2020, 2021 began with record-low housing inventory counts. However, we’ve been building inventory over the last several months as more listings come to the market (see graph below):
There are three main reasons we may see listings continue to increase throughout this fall and into the winter.
- Pent-up selling demand – Homeowners may be more comfortable putting their homes on the market as more and more Americans get vaccinated.
- New construction is starting to take off – Though new construction is not included in the realtor.com numbers, as more new homes are built, there will be more options for current homeowners to consider when they sell. The lack of options has slowed many potential sellers in the past.
- The end of forbearance will create some new listings – Most experts believe the end of the forbearance program will not lead to a wave of foreclosures for several reasons. The main reason is the level of equity homeowners currently have in their homes. Many homeowners will be able to sell their homes instead of going to foreclosure, which will lead to some additional listings on the market.
Bottom Line
If you’re in the market to buy a home, stick with it. There are new listings becoming available every day. If you’re thinking of selling your house, you may want to list your home before this additional competition comes to market.
4 Reasons You Should Consider Selling This Fall
If you’re trying to decide when to sell your house, there may not be a better time to list than right now. The ultimate seller’s market we’re in today won’t last forever. If you’re thinking of making a move, here are four reasons to put your house up for sale sooner rather than later.
1. Your House Will Likely Sell Quickly
According to the Realtors Confidence Index released by the National Association of Realtors (NAR), homes continue to sell quickly – on average, they’re selling in just 17 days. As a seller, that’s great news for you.
Average days on market is a strong indicator of buyer demand. And if homes are selling quickly, buyers have to be more decisive and act fast to submit their offer before other buyers swoop in.
2. Buyers Are Willing To Compete for Your House
In addition to selling quickly, homes are receiving multiple offers. That same survey shows sellers are seeing an average of 4.5 offers, and they’re competitive ones. The graph below shows how the average number of offers right now compares to previous years:
Buyers today know bidding wars are a likely outcome, and they’re coming prepared with their best offer in hand. Receiving several offers on your house means you can select the one that makes the most sense for your situation and financial well-being.
3. When Supply Is Low, Your House Is in the Spotlight
One of the most significant challenges for motivated buyers is the current inventory of homes for sale. Though it’s improving, it remains at near-record lows. The chart below shows how today’s low inventory stacks up against recent years. The lighter the blue is in the chart, the lower the housing supply.
If you’re looking to take advantage of buyer demand and get the most attention for your house, selling now before more listings come to the market might be your best option.
4. If You’re Thinking of Moving Up, Now May Be the Time
If your current home no longer meets your needs, it may be the perfect time to make a move. Today, homeowners are gaining a significant amount of wealth through growing equity. You can leverage that equity, plus current low mortgage rates, to power your move now. But these near-historic low rates won’t last forever.
Experts forecast interest rates will rise. In their forecast, Freddie Mac says:
“While we forecast rates to increase gradually later in the year, we don’t expect to see a rapid increase. At the end of the year, we forecast 30-year rates will be around 3.4%, rising to 3.8% by the fourth quarter of 2022.”
When rates rise, even modestly, it’ll impact your monthly payment and by extension your purchasing power.
Bottom Line
Don’t delay. The combination of housing supply challenges, low mortgage rates, and extremely motivated buyers gives sellers a unique opportunity this season but it will not last forever.
5 Reasons Today’s Housing Market Is Anything but Normal
There are many headlines out there that claim we’re reverting to a more normal real estate market. That would indicate the housing market is returning to the pre-pandemic numbers we saw from 2015-2019. But that’s not happening. The market is still extremely vibrant as demand is still strong even while housing supply is slowly returning.
Here’s the definition of normal from the Merriam-Webster Dictionary:
“conforming to a type, standard, or regular pattern: characterized by that which is considered usual, typical, or routine.”
Using this definition, here are five housing industry metrics that prove we’re nowhere near normal.
1. Mortgage Rates
If we look at the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:
- 1970s: 8.86%
- 1980s: 12.7%
- 1990s: 8.12%
- 2000s: 6.29%
- 2010s: 4.09%
Today, the average mortgage rate stands at 2.87%, which is very close to the historic low.
Currently, mortgage rates are anything but usual, typical, or routine.
2. Home Price Appreciation
According to Black Knight, a housing data and analytics company, the average annual appreciation on residential real estate prices since 1995 has been 4.14%.
According to the latest forecast from the National Association of Realtors (NAR), home price appreciation will hit 14.1% this year, which will be greater than any year since Black Knight began collecting this data.
Currently, home price appreciation is anything but usual, typical, or routine.
3. Months’ Supply of Inventory (Homes for Sale)
According to NAR:
“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”
As of the latest Existing Homes Sales Report from NAR, the current months’ supply of inventory stands at 2.6. That’s less than half of a normal supply.
Currently, the supply of homes for sale is anything but usual, typical, or routine.
4. Days It Takes To Sell a Home
The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on market stood at 35, according to NAR. Today, that number is cut in half and is now at 17 days.
Currently, the days-on-market metric is anything but usual, typical, or routine.
5. Number of Offers per Listing
According to NAR, the number of offers per listing stood at 2.2 in 2019. Today, that number is double at 4.5.
Currently, the number of offers per listing is anything but usual, typical, or routine.
Bottom Line
When…
- Mortgage rates are near historic lows
- Price appreciation is at historic highs
- Housing inventory is less than half of the normal amount
- The time it takes to sell a home is cut in half, and
- There are twice as many offers on each house
…it’s hard to say we’re in a normal market.
