A Monthly Insight into the Current Real Estate Market in Our Area
Mortgage Rates by Decade
There is more incentive than ever to make a move in today’s market. Mortgage interest rates have dropped considerably over the past year and compared to what we have seen in recent decades, it is a great time to buy a home. Locking in a low rate today could save you thousands of dollars over the lifetime of your home loan, but these low rates may not last forever. If you are in a position to buy a home, let us connect to determine your best move in today’s housing market while interest rates are still in your favor.
How Much Leverage Do Today’s House Sellers Have?
The housing market has been scorching hot over the last twelve months. Buyers and their high demand have far outnumbered sellers and a short supply of houses. According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), sales are up 23.7% from the same time last year while the inventory of homes available for sale is down 25.7%. There are 360,000 fewer single-family homes for sale today than there were at this time last year. This increase in demand coupled with such limited supply is leading to more bidding wars throughout the country. Rose Quint, Assistant Vice President for Survey Research with the National Association of Home Builders (NAHB), recently reported: “The number one reason long-time searchers haven’t made a home purchase is not because of their inability to find an affordably-priced home, but because they continue to get outbid by other offers.” A survey in the NAHB report showed that 40% of buyers have been outbid for a home they wanted to purchase. This is more
than twice the percentage in 2019, which was 19%. Sellers have tremendous leverage when negotiating with buyers. In negotiations, leverage is the power that one side may have to influence the other side while moving closer to their negotiating position. A party’s leverage is based on its ability to award benefits or eliminate costs on the other side. A buyer wants three things: 1) buy a home, 2) before prices rise, 3) take advantage of historically low mortgage rates while they last! These 3 buyer needs give the homeowner tremendous leverage when selling their house. Most realize this leverage enables the seller to sell at a good price. As mentioned buyers have compelling reasons to purchase a home now, and many homeowners have challenges to address if they want to sell. Perhaps they can make a deal to satisfy each party’s needs by selling at today’s rates and leasing back from the buyer. Maybe with the leverage you currently have, you can negotiate a deal that will allow you to make the move of your dreams. Let us talk!
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Where Have all the houses gone?
In today’s housing market, it seems harder than ever to find a home to buy. Before the health crisis hit us a year ago, there was already a shortage of homes for sale. When many homeowners delayed their plans to sell at the same time that more buyers aimed to take advantage of record-low mortgage rates and purchase a home, housing inventory dropped even further. Experts consider this to be the biggest challenge facing an otherwise hot market while buyers continue to compete for homes. As Danielle Hale, Chief Economist at realtor.com, explains: “With buyers active in the market and seller participation lagging, homes are selling quickly and the total number available for sale at any point in time continues to drop
lower. In January as a whole, the number of for sale homes dropped below 600,000.” Every month, realtor.com releases new data showing the year-over-year change in inventory of existing homes for sale. As you can see in the map above, nationwide, inventory is 42.6% lower than it was at this time last year. Does this mean houses are not being put on the market for sale? Not exactly. While there are fewer existing homes being listed right now, many homes are simply selling faster than they are being counted as current inventory. The market is that competitive! Homes are being listed for sale, but not at a rate that can keep up with heavy demand from competitive buyers. The health crisis has been a major
reason why potential sellers have held off this long, but as vaccines become more widely available, homeowners will start making their moves, says Ali Wolf, Chief Economist at Zonda. With more homeowners getting ready to sell later this year, putting your house on the market sooner rather than later is the best way to make sure your listing shines brighter than the rest. Today’s housing market is a big win for sellers. If you are in a position to sell your house now, you may not want to wait for your neighbors to do the same and face additional competition.
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Forty-Seven Percent of New Buyers Are Surprised by How Affordable Homes Are
Headlines matter. Right now, it is hard to read about real estate without seeing a headline that suggests homes have become unaffordable for most Americans. In reality, There’s hard evidence that shows how owning a home is more affordable than renting in most parts of the country, as record-low interest rates are keeping monthly mortgage payments about 23% lower than the typical payment of 20 years ago. Despite the facts, misleading headlines persist, and they impact how hopeful homebuyers perceive the market. In a recent survey by realtor.com, home shoppers indicated they were surprised by what they could actually afford when buying their first home. In fact, 47% discovered their budget was larger than they expected. George Ratiu, Senior Economist at realtor.com, explains: “For first-time buyers, especially, the drop in the 30-year mortgage rate provides unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same.” So why do these negative headlines that cast doubt on affordability continue to exist? Most analysts only look at two of the three elements that make up the
up the affordability equation: price and income. It is true that incomes have not kept up with the price of houses. However, affordability is about the cost of the home, not just the price. For that reason, mortgage rates, the third element of the affordability equation, are important to consider. For example, below is the typical mortgage payment for assorted dates going back to 2000, as calculated by CoreLogic. Outside of the housing crash it is more affordable to buy a home today when you consider all three elements of the affordability equation: price, income, and mortgage rate.
