A Monthly Insight into the Current Real Estate Market in Our Area
In This Issue
What is the inventory status in our local market? Is there a shortage? Yes!
How to Make a Winning Offer
Today’s buyers are faced with a strong seller’s market, which means there are a lot of active buyers competing for a relatively few available homes.
As a result, it is essential to understand how to make a confident and competitive offer. Here are five tips for success in this critical stage of the homebuying process. 1) Listen to Your Real Estate Advisor; “Your agent will work with you to make an informed offer based on the market value and condition of the home, and recent sales.” An article from Freddie Mac gives direction on making an offer on a home. From the start, it emphasizes how trusted professionals can help you stay focused on the important things: “Remember to let your homebuying team guide you on your journey, not your emotions.” 2) Understand Your Finances; Having a complete understanding of your budget and how much house you can afford is essential. The best way to know this is to get pre-approved for a loan early in the homebuying process. Only 44% of today’s prospective homebuyers are planning to apply for pre-approval, so be sure to take this step so you stand out from the crowd. Doing so makes it clear to
sellers you are a serious and qualified buyer, and it can give you a competitive edge in a bidding war. 3) Be Prepared to Move Quickly; According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), the average property sold today receives 3.7 offers and is on the market for just 21 days. As soon as you find the right home for your needs, be prepared to submit an offer as quickly as possible. 4) Make a Fair Offer; It is only natural to want the best deal you can get on a home. Do not make an offer that will be tossed out as soon as it is received. The expertise your agent brings to this part of the process will help you stay competitive. 5) Stay Flexible; In a competitive market, it is important to stay nimble throughout the negotiation process. You can strengthen your position with an offer that includes flexible move-in dates, a higher price, or minimal contingencies. The bottom line is this market makes it important to make a strong offer.
How Upset Should You Be about 3% Mortgage Rates?
Last Thursday, Freddie Mac announced that their 30-year fixed mortgage rate was over 3% (3.02%) for the first time since last July. That news dominated real estate headlines that day and the next. Articles talked about the “negative impact” it may have on the housing market. However, we should realize two things: 1) The bump-up in rate should not have surprised anyone. Many had already projected that rates would rise slightly as we proceeded through the year. 2) Freddie Mac’s comments about the rate increase were not alarming: “The rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a
strong spring sales season.” A “muted” rise in rates “will not sink the real estate market, and most experts agree that it will be “a strong spring sales season.” What does this mean for you? Obviously, any buyer would rather mortgage rates not rise at all, as any upward movement increases their monthly mortgage payment. However, let us put a 3.02% rate into perspective. Here are the Freddie Mac annual mortgage rates for the last five years: (2016: 3.65%, 2017: 3.99%, 2018: 4.54%, 2019: 3.94%, and 2020: 3.11%). Though 3.02% is not as great as the sub-3% rates we saw over the previous seven weeks, it is still very close to the all-time low (2.66% in December 2020). And, if we expand our
look at mortgage rates to consider the last 50 years, we can see that today’s rate is truly outstanding. Hereare the rates over the last five decades: (1970s: 8.86%, 1980s: 12.7%, 1990s: 8.12%, 2000s: 6.29%, and 2010s: 4.09%). Being upset that you missed the “best mortgage rate ever” is understandable. However, do not throw the baby out with the bathwater. Buying now still makes more sense than waiting, especially if rates continue to bump up this year. It is true that you may not get the same rate you would have five weeks ago. However, you will get a better rate than at almost any other point in history.
Do I Really Need a 20% Down Payment to Buy a Home?
Is the idea of saving for a down payment holding you back from buying a home right now? You may be eager to take advantage of today’s low mortgage rates, but the thought of needing a large down payment might make you want to
pump the brakes. Today, there is still a common myth that you have to come up with 20% of the total sale price for your down payment. This means people who could buy a home may be putting their plans on hold because they do not have that much saved yet. The reality is, whether you are looking for your first home or you have purchased one before, you most likely do not need to put 20% down. Here is why. According to Freddie Mac: “The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.” If saving that much money sounds daunting, potential homebuyers might give up on the dream of homeownership before they even begin – but they do not have to. National Association of Realtors (NAR) indicates that the median down payment has not been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. As the image below shows, today’s median down payment is clearly less than 20%. As we can see, the median down payment was lowest for first-time buyers with 7% in 2020. If you
are a first-time buyer, understand there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5%. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants. It is important for potential homebuyers to know they likely do not need to put down 20% of the purchase price. Do not let down payment myths keep you from hitting your homeownership goals.