Sure, living with your parents has its upsides. Free laundry, home-cooked meals, and (hopefully) no rent. But if you’re one of the many young adults still living at home, you might also be feeling a little stuck.
And that’s OK —life is expensive right now. Student loans, rising rents, and the cost of housing have made it harder than ever to take the leap into homeownership. But here’s the thing…waiting too long to make a move might cost you more in the long run.
While living with parents can be a practical solution in certain circumstances, exploring homeownership can offer long-term financial benefits and wealth creation.
Why Owning a Home is Worth Considering Now
Living with family may help you save in the short term, but buying a home is one of the smartest financial moves you can make for your future. Here’s why:
– Equity is like a savings account (but better). Every mortgage payment you make builds your equity—essentially money in your pocket for the future.
– The average homeowner’s net worth is 40 times that of a renter
– Your home is your domain. Imagine customizing your space exactly how you want it, without asking anyone’s permission.
– Stability matters. With rent prices skyrocketing, locking in a fixed mortgage payment can help you plan better for the future.
Billionaire Andrew Carnegie famously said that 90% of millionaires got their wealth by investing in real estate.
With that in mind, purchasing a home to build long-term wealth is something that should seriously be considered. Find out more on that here…
But What If I Don’t Think I Can Afford a Home?
This is where things get interesting. Many first-time buyers think they need a massive down payment or a perfect credit score, but that’s not necessarily true.
Let’s take a look at FHA loans, for example.
FHA loans are fantastic options for first-time buyers. They require a much lower down payment—sometimes as little as 3.5%—and are more flexible with credit scores.
This lower upfront cost opens doors for prospective buyers who may struggle to come up with a significant down payment, providing a more attainable path to home ownership.
So if you’ve been building your savings but feel like you’re still not quite there, an FHA loan could be the key to unlocking your dream of homeownership. You can find out more about FHA loans here…
Take the First Step Today
You don’t have to figure it all out on your own. The best thing you can do is talk to a local mortgage professional. We’ll walk you through your options, help you understand what you qualify for, and make a plan to get you out of the nest and into your own place.
Switching from renter to homeowner is simpler than you might think. It’s a strategic move towards securing your financial future.
Picture This…
Your first place—your rules, your space. A cozy kitchen for hosting friends, a backyard for your dog, or even just a living room where you can finally hang that weird painting you love.
Doesn’t that sound better than your childhood bedroom?
It’s time to explore your options and take that first step toward homeownership. Reach out to me today to see if an FHA loan or another program might be the perfect fit for you.
The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.
Looking to make your dream home a reality? I’d like to share a few expert tips to help you tackle the challenge of home affordability with ease.
As a seasoned mortgage lender, I understand that navigating a home purchase can be a daunting task, especially for first-time homebuyers.
However, with the right guidance and practical knowledge, you can make informed decisions and achieve your dream of homeownership.
This practical guide aims to give you the essential information needed to make sound financial choices when it comes to buying a home.
Understanding Home Affordability
When considering purchasing a home, it’s necessary to evaluate your financial position realistically. Home affordability is not just about the price of the house; it includes various factors, including your income, existing debts, credit score, and the down payment you can afford.
It’s important to understand that lenders assess your ability to pay back a mortgage by analyzing these factors.
Understanding Your Financial Condition
Start by carefully evaluating your current financial situation. Take stock of your income, monthly expenses, outstanding debts, and any potential future expenses. It’s critical to have a clear understanding of your financial health to determine the amount you can comfortably afford to spend on a home.
Know Your Different Mortgage Options
There are various types of mortgages available, each with its own set of terms and conditions. It’s important to explore your options and choose the one that best suits your financial situation and long-term goals.
It would be my pleasure to coach you through the particulars of different mortgage options to help you make an informed decision.
Setting Realistic Expectations
While it’s natural to have grand visions of your dream home, it’s crucial to set realistic expectations based on your financial position.
Be open to exploring different neighborhoods, property types, and home features that align with your budget. Remember, finding the perfect home is about striking a balance between your desires and financial reality.
Saving for a Down Payment
Saving for a down payment is often one of the biggest obstacles for potential homebuyers. However, with diligent budgeting and financial planning, you can work towards accumulating the necessary funds for a down payment.
Your credit score plays a significant role in determining your mortgage eligibility and the interest rate you may receive. Take proactive steps to improve your credit score by paying bills on time, reducing outstanding debts, and maintaining a healthy credit utilization ratio.
Before starting your home search, consider seeking pre-qualification for a mortgage. A pre-qualification not only gives you a clear understanding of your budget but also signals to sellers that you are a serious and qualified buyer.
It’s my job to assist you in obtaining a pre-qualification, taking into account your financial details and helping you understand the implications of the pre-qualification process. Find out the specifics here…
Consulting with The Lending Coach
Navigating the complexities of home affordability can be a little bit overwhelming, especially for first-time homebuyers. That’s why it’s essential to consult with a knowledgeable and experienced mortgage professional like myself who can provide personalized guidance tailored to your specific needs.
I can offer valuable insights, answer your questions, and help you make well-informed decisions as you embark on your homebuying journey. Schedule a call with me here…
Moving Forward
If you’re ready to explore your options and discuss your specific homebuying needs, I encourage you toreach out to schedule a consultation. Together, we can work towards achieving your homeownership goals and navigating the path to home affordability with confidence.
My expertise and commitment to personalized service can provide you with the guidance and support you need to make informed decisions and move closer to purchasing your dream home.
Don’t hesitate to take the next step – contact me today to begin your journey towards homeownership.
The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.
The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.
My 2025 real estate and mortgage forecast will take a look at inflation, the labor markets, and the Federal Reserve to help us better understand what we can expect in the coming year.
These 3 factors portend for potentially lower mortgage rates over the course of this year…while home values will continue to rise.
Right now, housing supply is still relatively low, and demand is growing – and that means home price appreciation.
On the mortgage side, will interest rates finally come back? Let’s take a look at the factors that will most impact real estate and mortgages in 2025…
Inflation
The single biggest driver of bond yields AND mortgage rates is inflation.
Mortgage rates are essentially determined by inflation, which erodes the buying power of the fixed return that a mortgage holder receives. When inflation rises, lenders demand a higher interest rate to offset the more rapid erosion of that buying power.
And that’s what we’ve been seeing over the last 3 years.
When the Fed hikes rates, they are trying to slow the economy and curb inflation. If successful in cooling inflation, mortgage rates will decline.
When they lower rates, the Fed is trying to spur economic growth with more availability to less expensive capital.
As I’ve mentioned previously, the Federal Reserve botched their management of inflation in 2020 and 2021 and were forced to make severe changes to offset the damage. This brought market instability and increased mortgage rates.
Inflation has remained stubbornly high over the last year, but news on the horizon looks promising.
As a matter of fact, I believe that the current data (the Personal Consumption Index or PCE) is overstating inflation by about .4%
Once this is worked out, we should see the inflation numbers come down, leading the Fed to want to reduce the Federal Funds rate.
One of the largest components in the PCE is “shelter costs”, or rents. You can see in the chart below that these costs have been dropping regularly, and this trend will show up in the months ahead.
The trend in inflation is working in the borrower’s favor, and it means the Fed’s going to have to look at cutting the Federal Funds rate even more in 2025.
It looks like core inflation might be in the low 2% range by the middle of this year, which bodes well for lower mortgage rates.
One wild card, however, will be how the bond market views the ever-expanding federal deficit and debt. The level of government spending isn’t giving great comfort to those who regularly purchase government bonds, so this is something everyone needs to be watching. Increased debt loads could move bond yields higher, which will not help mortgage rates.
The Labor Market
There has been much discussion about the labor markets and employment data this year.
Estimates by the Federal Reserve Bank of Philadelphia indicate that the employment changes from March through June 2024 were significantly different compared with preliminary state estimates from the Bureau of Labor Statistics’ (BLS).
This year the BLS stated that the US economy added nearly 2.5 million new jobs…but the Quarterly Census of Employment and Wages (QCEW) done by the Philadelphia Fed showed growth of only 1.25 million jobs.
That’s a 50% discrepancy! One might even conclude that the BLS numbers were potentially inflated due to election posturing.
Nevertheless, here’s what’ currently happening regarding employment:
As you can see, unemployment is up nearly 1% over the last 18 months and is continuing to rise.
Secondly, the duration of an average unemployment stay (based on how long a laid-off employee receives unemployment benefits) is up 21% over the last 7 months and is continuing to rise:
This means that finding a job once you’ve been laid off is getting tougher, signaling a tightening labor market.
Next, there are few jobs available right now, per the Bureau of Labor Statistics:
There are 30% fewer job openings since January of 2023. So…the unemployment rate is moving higher, job openings are dropping, and people are collecting unemployment for a longer amount of time.
My thinking here is that the labor market isn’t in as good of shape as many in Washington think. This may bode well for mortgage rates if these trends continue
The Federal Reserve
For starters, the Federal Reserve’s “dual mandate” is to keep prices stable AND achieve maximum employment.
It does this by controlling the money supply, and raising or lowering interest rates when the economy is slowing down or growing too fast.
We’ve seen this in the last year, when the Fed reduced its Federal Funds rate by 100 basis points, as inflation started to wane.
When the Fed cut interest rates in September, many hoped it would kick-start the frozen housing market. Mortgage rates track the 10-year US Treasury yield, which was expected to fall in anticipation of further rate cuts. However, recent economic data has looked stronger than expected, which has shifted the market’s expectations, sending bond yields higher.
Today, most analysts believe that the Fed will continue to cut its lending rate…and that it might well spur mortgage rates to follow this time around.
Per the diagram below, the majority of Fed members believe that the Federal Funds rate (currently at 4.375%) will be lowered to 3.875% sometime in 2025.
However, with the labor markets numbers being potentially over inflated, many believe that many more Fed voting members will change their tune if/when unemployment numbers start to rise.
And as shown earlier, there’s a very good chance that the unemployment rate might very well rise in the months ahead, forcing the Fed to cut their interbank lending rate even further.
Most Fed members believe that unemployment will stay between 4.2% and 4.3% – with a few thinking it could go as high as 4.5%:
But what if inflation moves higher? What if the recent corporate layoffs mentioned previously start to show more in those labor reports?
My guess is that the Fed will lower rates to stave off higher inflation…which should be good for mortgage rates.
Mortgage Rate Forecast
As mentioned previously, the 30-year mortgage rate generally follows the path of the 10-year treasury bond. Today, the 10-year yield is hovering right around 4.5%.
But how does that relate to mortgage rates?
Well, the historical spread between the 30-year fixed mortgage rate and the 10-year treasury is between 1.6% and 2% – or averaging around 1.8%. Meaning, that if the 10-year yield is at 4%, mortgage rates should be right around 5.8% (4% yield plus 1.8% spread).
However, today’s market is skewed…mostly due to the 2020/2021 event and it’s resulting hangover. Take a look:
As you can see, today’s spread is over 2.5% – far outside of historical norms. And, it’s declining, which is good news.
It September of 2024, the 10-year yield touched 3.6% (and it spurred a fair amount of refinance activity for about 3 weeks, before they rose to 4% in early October):
So, what if the current spread went from 2.5% to just 2.25% AND the 10-year treasury dropped to 3.5%? Rates could look like this:
And this absolutely could happen this year. Based on inflation and employment data – coupled with continued spread reduction, mortgage rates in the high 5% range is quite realistic.
As mentioned previously, the wild-card will be how the bond market views government spending a debt.
Real Estate Forecast
Let’s turn our attention to real estate and what we can expect in 2025.
The forecast for real estate centers once again on supply and demand, and the supply continues to be tight…more on that later.
First, though, let’s take a look at what’s happening with the home buying demographic. As you can see in the chart below, there are plenty of opportunities for buyers in the Millennial age category…and the Gen Z group isn’t too far behind:
We will see great homeowner growth in both Gen Z AND Millennials over the next few years.
At the same time, will new home construction keep up to fill this demand? Let’s take a look.
First, active listings have fallen significantly since pre-Covid. Listings are down 21% since 2018 AND the population has grown by over 12M people. Yes, listings are up year-over-year (which is good news, indeed), but nowhere near what’s required.
Household formations (or the amount of NEW households being created through cohabitation or marriage) tells the story of how many new homes are needed every year. Interestingly, the statistic has remained very constant at right around 1.9M per year:
On the other hand, new homes being built is remaining constant at 1.3M per year:
As you can see, there are far more households being formed than builders putting up new homes. This is why the real estate market has been so strong of late and why you we seeing prices increase due to a lack of inventory. It’s going to be a similar story for 2025 and more.
So, what does this mean?
Well, it means that home prices will continue to appreciate…and that will accelerate even faster when mortgage rates improve.
I see appreciation in 2025 at over 4% for the year AND appreciation over the next 5 years to be over 30%. This means real estate is a good buy right now and will help create great wealth in the future.
In Conclusion
Here’s what I think will happen in 2025:
It’s looking like 2025 will be an interesting year…and one that will have solid wreath-building opportunities available. Do reach out to me to discuss how you might be able to move forward in 2025 to take advantage of this changing market!
This Market Update and similar such communications are for informational purposes only and are based on publicly available information. These materials are general communications, which are not impartial, and are provided solely for discussion purposes, and not in connection with any product or service offering. The opinions and views expressed in this Market Update are as of the date of this communication and are subject to change. Any forward-looking views and statements contained in this Market Update are based on current estimates or expectations of future events or results. Actual results may differ materially from those described in this Market Update. The views expressed in this communication should not be attributed to Guild Mortgage Company as a whole and may not be reflected in the strategies and products offered by Guild Mortgage Company.
The Federal Housing Finance Agency (FHFA) announced that the maximum baseline conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2025 will rise to $806,500 — an increase of $39,950, or 5.2%, from 2024.
The increase in loan limits for 2025 means that more mortgages will be bought by Fannie and Freddie, which will make it easier for home buyers to qualify for and close their loans.
The conforming loan limits are required by the Housing and Economic Recovery Act to reflect the percentage change in the average U.S. home price during the most recent 12-month period ending before the time of determining the annual adjustment.
In 2025, the conforming loan limit will rise 5.21% because FHFA has determined that the average U.S. home value increased by that amount between the third quarters of 2023 and 2024.
Higher loan limits will be in effect in higher-cost areas as well. The new ceiling loan limit in high-cost markets will be $1,209,750, which is 150% of $806,500. The previous ceiling was $1,149,825.
Thomas Eugene Bonetto
Mortgage Loan Originator
NMLS: 1431961
About The Coach
Tom Bonetto has been helping his customers and players achieve their best for nearly 30 years. His goal is to provide both a superior customer experience and tremendous value for both his business associates and his players alike.
