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Tag: interest rates (Page 1 of 5)

Why Pausing Your Home Search Might Not Be a Good Idea

For those who have been shopping for a home recently, you’ve likely confronted more than a few challenges along the way.

High mortgage interest rates and rising home prices cut into affordability, pushing many would-be buyers to the sidelines. Secondly, a lack of housing inventory is only making matters worse.

woman with credit card pondering while buying online with laptop

Due to these conditions, some buyers have decided to pause their home purchasing plans on hold, at least temporarily. But is that such a good idea?

You can find out more from Erik Martin’s article at The Mortgage Reports here…

Temporarily stopping your home buying search might seem like a reasonable decision in certain situations, such as a volatile real estate market or personal financial uncertainty.

However, there are several compelling reasons why hitting the pause button on your home buying journey might not be the best move.

Ever-Changing Market

The real estate market is dynamic and ever-changing. Pausing your search could mean missing out on potential opportunities.

Market conditions can shift quickly, and a property that fits your criteria perfectly may become available during your hiatus.

In today’s market, for example, home prices are continuing to rise due to lower supply and higher demand. So, if buyers choose to wait, it’s a guarantee that they will pay more for a home in the future.

By staying active in your search, you can capitalize on favorable market conditions and secure a property that aligns with your needs and preferences.

Long-Term Hold

Moreover, real estate is a long-term investment that tends to appreciate over time. This is especially true if borrowers are looking to keep the property for an extended period of time, versus flipping it quickly.

By delaying a purchase, would-be buyers could potentially miss out on the appreciation of property values in their desired area.

This could limit their ability to build equity and wealth through homeownership. Over the years, the property they had their eye on might become out of reach due to escalating prices.

Interest Rates

Yes, interest rates are at much higher levels than they were 2+ years ago, but most experts agree that waiting for rates to come down before making a purchase is a risky strategy.  Timing the market is always a very difficult task.

When rates do drop, many believe that there will be renewed interest and added demand in the real estate market…which means prices will rise at a faster pace than today.

By waiting, you might end up paying more for the same property when interest rates inevitably drop.  Remember, borrowers can always refinance when rates go down, so Marry the House but Date the Rate’!

In Conclusion

While pausing your home buying search might seem like a cautious approach, it comes with potential drawbacks that could impact your financial well-being and future prospects.

The real estate market’s volatility, fluctuating interest rates, and the potential appreciation of property values all underscore the importance of staying active in your pursuit of homeownership.

By maintaining a proactive stance, you position yourself to make informed decisions that align with your goals and aspirations.

Please reach out to me for more so we can strategize about the right options for you!

Consumer View of US Housing Market Reach New Lows – But Is It Correct?

Only 21% of Americans say it is a good time to buy a house, the lowest percentage ever in Gallup’s polling sample.

Prior to 2022, for example, 50% or more respondents unfailingly thought it was a good time to make a home purchase, and you can find the specifics of the poll here….

The latest results are from Gallup’s annual Economy and Personal Finance poll, conducted over 3 weeks in April. Unbelievably, 78% percent of those surveyed say it is a bad time to buy a house right now.

To add some context, Gallup first asked Americans about their thoughts on the housing market in 1978, when 53% thought it was a good time to buy.

Per Jeffrey Jones’ report, “thirteen years later, when the question was asked again, 67% held that view. The record high of 81% was recorded in 2003, at a time of growing homeownership rates and housing prices.”

No doubt the respondents are sure of their positions, but does the data really bear that out?  And what does the future hold?

The Current Situation – Two Viewpoints

Per Jones, “in the past two years, as housing prices have soared and the Federal Reserve has raised interest rates to try to tame inflation, houses have become less affordable for many Americans, and views of the housing market have tumbled.”

However, another housing survey, this one from the industry specific MBS Highway, showed in April another solid increase in buying activity as the spring selling/buying season kicked into high gear. This marks the 4th-straight month of improving sentiment for their report.  You can find out more on that here…

68% of respondents characterized their market as ‘active’ and 33% of respondents indicated that they were now seeing price increases.

Media Bias Might Be To Blame

The latest Existing Home Sales report showed that the median home price declined on an annual basis for the first time in almost 11 years. That seems like a big headline, right?!

This is a classic case of the media trying to gain and keep viewership with shock headlines.

In many ways, our mainstream media is not truly interested in digging deeper for the facts and truth.  You can find out more on that here…

First of all, the decline was only 0.2% – and it was for the median home price, which is NOT the same as appreciation.

FHFA’s latest appreciation report showed that home prices rose 5.3% year over year. And according to Case-Shiller, they rose 3.8% year over year.

These are the two best ways to measure home price appreciation.

The Real Inside Scoop

Although no one can deny that higher mortgage rates are keeping would-be buyers on the sideline, the story that no one is talking about is the lack of housing supply.  You can find out more on that here…

More importantly, let’s take a closer look at active listings in the US:

You might remember from your Econ 101 class that supply and demand is what sets prices.  Smaller supply means that a higher price is to be paid…so I do believe that home prices will not be going down any time soon!

All things considered, the opportunity in this market appears to be very favorable.  If you are trying to wait to time the market, that home you are waiting for will just be more expensive down the road. 

And if you make that purchase now and interest rates fall (as many think will happen), you can easily refinance into a lower rate!

In Conclusion

Per Jones, “it is likely that Americans’ pessimism about homebuying reflects the high prices and high interest rates that are conspiring to make mortgage payments less affordable. These attitudes may keep many prospective homebuyers out of the market.”

If that’s the case, that means there is a window of opportunity for buyers ready to act today.

Do reach out to me to find out more, as it would be my pleasure to help you finance that investment property or the home of your dreams.

The Temporary Rate Buydown – A Great New Option

A unique offering is now available – a temporary rate buydown – to lower your interest rate and monthly payment in years one and two of your new mortgage. 

hand of a person using a calculator near cash money on wooden table

This is a negotiated cost to be paid by the seller or builder – and your loan rate is reduced for an initial period.

This temporary rate buydown lowers your monthly payment and leaves more cash on hand each month. That difference is yours to save or put to good use around your new home.

There are no surprises…the rate buydown is adjusted each year by a set amount. It diminishes gradually until it settles at the original rate with no reduction of mortgage payment at the end of the initial period.

Buydown Example

Here’s an example of a $400,000 mortgage amount with a two-year and one-year buydown option.

Assuming an interest rate of 6%, the principal and interest payment would be $2,398.20 on a 30-year fixed mortgage…

And here’s what those payments would be with the buydown options:

As you can see, the savings are quite significant – nearly $500/month in year one and an overall savings of nearly $9,000 in years one and two!

Reach Out To Me For More

This temporary rate buydown is available on Conventional, FHA, VA, and USDA loans.  You can contact me here and I would be happy to run multiple scenarios for you, as well.

Mortgage Rates 2022 – Current vs Historical Trends

black and silver laptop with stock market display on screen

Mortgage rates have essentially doubled since the beginning of this year. Historically, however, interest rates have often been higher — sometimes much higher — than they are today.

magnifying glass on top of document

The average 30-year mortgage rate over the last fifty years is just under 8%. So even though today’s mortgage rates have jumped to the 5% range, they’re still a good deal by comparison.

I’m linking to an article from Peter Miller of The Mortgage Reports that’s a must read in order to gain some good perspective on what’s happening in today’s marketplace.

2022 Mortgage Rate Chart

Mortgage interest rates fell to record lows in 2020 and 2021 during the Covid pandemic.

However, inflation has now surged to four-decade highs, causing those rates to rise quickly this year.

Historical Chart

Despite this increase, today’s 30-year mortgage rate is still quite a bit below average from a historical perspective.

Freddie Mac — the main industry source for mortgage rates — has been keeping records since 1971. Between April 1971 and August 2022, 30-year fixed-rate mortgages averaged 7.76 percent.

Here’s the average mortgage rate by year since 1974…

Mortgage Rate Outlook

As Freddie Mac explained on August 4:

roll of american dollar banknotes tightened with band

“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment.”

With that said, it’s not easy to predict what will happen to mortgage rates in late 2022. The Fed is likely to keep hiking interest rates in an attempt to bring inflation under control.  Couple that with a recession, however, and mortgage rates could very well move lower.

In Conclusion

Finally, it’s important for you and our clients to understand that the average mortgage is held for less than 7 years…and they are not at all married to that rate, especially if they get better!

If you or your clients are considering a purchase, your real estate search shouldn’t go on hold because of rising inflation or higher mortgage rates.  Contact me for more…as it would be my pleasure to help you.

Inflation and Real Estate – Should Buyers Wait? History Says “NO!”

miniature village photo

Inflation is hot…and so is real estate.  But what does the future hold for both?

a laptop with graph on screen

As we’ve talked about before, the Federal Reserve is late to the party in dealing with inflation and the latest data shows the rate of inflation is still rising.

Many are feeling the pinch in their wallets, at the gas pump, and at the grocery store.

For would-be real estate buyers that just begs the question…is now a good time to purchase a home?

I’m linking to an article from the real estate blog Keeping Current Matters, and the author does a great job in highlighting why now might be a very good time to buy.  You can access the entire article here…

Greg McBride, the Chief Financial Analyst at Bankrate, explains how inflation is affecting the housing market:

“Inflation will have a strong influence on where mortgage rates go in the months ahead…Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”

While there’s no denying it’s more expensive to buy and finance a property this year than it was last year, it doesn’t mean potential buyers should pause their search. Here’s why…

History Says So – Real Estate Is A Great Hedge Against Inflation

During periods of inflation, prices generally rise across all areas of the economy.

white concrete building

Historically, however, real estate ownership is a fantastic protection against those increasing costs because buyers can “lock-in” what’s likely the household’s largest monthly fixed cost for the duration of your loan.

Not to mention, as property prices continue to appreciate, the home’s value will, as well.

That’s why Mark Cussen, Financial Writer at Investopedia, says:

“Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”

Secondly, nearly all industry experts agree that although the current rate of home appreciation can’t stay this hot, the likelihood of homes losing value is extraordinarily slim. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

In Conclusion

Purchasing real estate is one of the best financial decisions that can be made during inflationary times. Buyers also receive the advantage of the added security of owning their property in a time when experts are forecasting prices to continue to rise.

If you are considering a purchase, your real estate search shouldn’t go on hold because of rising inflation or higher mortgage rates.  Contact me for more…as it would be my pleasure to help you.

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