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Why Rising Mortgage Rates Push Buyers off the Fence

Why Rising Mortgage Rates Push Buyers off the Fence | Simplifying The Market

If you’re thinking about buying a home, you’ve probably heard mortgage rates are rising and have wondered what that means for you. Since mortgage rates have increased over two percentage points this year, it’s natural to think about how this will impact your homeownership plans.

Today, buyers are reacting in one of two ways: they’re either making the decision to buy now before rates climb higher or they’re waiting it out in hopes rates will fall. Let’s look at some context that can help you understand why so many buyers are jumping off the fence and into action rather than waiting to buy.

A Look Back: How the Current Mortgage Rate Compares to Historical Data

One factor that could help you make your decision to buy now is how today’s mortgage rates compare to historical data. While higher than the average 30-year fixed rate in recent years, the latest rates are still comparatively low when you look at the bigger picture of where rates have been since 1971 (see graph below):

Why Rising Mortgage Rates Push Buyers off the Fence | Simplifying The Market

Mark Fleming, Chief Economist at First American, explains it like this:

“. . . historical context is important. An average 30-year, fixed mortgage rate of 5.5 percent is still well below the historical average of nearly 8 percent.”

If you’re deciding whether to buy now or wait, this is important context to have. Today’s mortgage rate still gives you a window of opportunity to lock in a rate that’s comparatively lower than decades past.

A Look Ahead: What Happens if Rates Climb Further

The buyers who are springing into action now are also motivated to make their move because they know rates have risen steadily this year, and they’re eager to get ahead of any further increases.

Why? When mortgage rates climb, they impact the monthly mortgage payment you’ll have on the home you’re buying. Basically, it’ll likely cost you more to buy a home if you wait. Experts say mortgage rates will rise (although more moderately) in the months ahead. Odeta Kushi, Deputy Chief Economist at First American, explains:

“. . . ongoing inflationary pressure remains likely to push mortgage rates even higher in the months to come.”

So, if you’re ready and financially able to buy now, it may make more sense to get off the fence and make your purchase sooner rather than later. As Nadia Evangelou, Senior Economist at the National Association of Realtors (NAR), says:

With even higher interest rates on the horizon, I don’t see any reason to hold off from purchasing a home right now. If you feel financially secure, you should start looking for a home.”

At the end of the day, there is no perfect advice on when to buy a home. What you should do depends on your goals, your finances, and your personal situation. Use this information with the help of local real estate professionals to make an informed decision on what’s best for you. The Mortgage Reports sums it up best:

“. . . if you’re on the fence about whether to buy now or wait for a better deal, buying sooner rather than later might be wise. That said, home buying is always a personal decision. Whether you should buy in 2022 depends on your financial situation and the local housing market where you live.”

Bottom Line

For many buyers, rising mortgage rates are motivating them to act now and make a purchase before rates rise higher. To decide what move is best for you, let’s connect so you have expert advice on your side.

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If You’re a Homeowner, You Have Incredible Leverage When You Sell Today

If You’re a Homeowner, You Have Incredible Leverage When You Sell Today | Simplifying The Market

In today’s housing market, homeowners have a great opportunity to sell their house and receive the best terms for their personal situation. That’s because there’s a limited number of homes for sale, which is creating competition among buyers. Right now, homebuyers want three things:

These buyer needs give you an amazing advantage – also known as leverage – when you sell.

What Does This Mean for Sellers Today?

You might already realize this enables you to sell at a good price, but you’re also in a great position to get the best terms to suit your needs.

According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), the average home sold is receiving 4.8 offers. That’s why there’s a good chance you’ll get offers from multiple buyers who are willing to compete for your house. When you do, you should look closely at the terms of each offer to find out which one has the best options for you.

And if you have questions at any point in the process, remember your trusted real estate advisor can help. They’re experts who understand the fine print, know how to compare the terms of various offers, and will help you select the best one for your situation.

Bottom Line

If you’re thinking of selling your home, know buyer demand in today’s market gives you a great opportunity to get the best terms and price when you sell your house. Let’s connect today to discuss how much leverage you have as a seller in today’s market.

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Should You Update Your House Before Selling? Ask a Real Estate Professional. [INFOGRAPHIC]

Should You Update Your House Before Selling? Ask a Real Estate Professional. [INFOGRAPHIC] | Simplifying The Market

Should You Update Your House Before Selling? Ask a Real Estate Professional. [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • If you’re deciding whether you should make updates before you sell your house, lean on your trusted real estate advisor to be your guide.
  • In today’s sellers’ market, buyers have limited options and may be more willing to take on repairs themselves.
  • If you’re thinking about selling your house, let’s connect so you have expert advice that’s customized to your home and our local area.
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Will Home Prices Fall This Year? Here’s What Experts Say.

Will Home Prices Fall This Year? Here’s What Experts Say | Simplifying The Market

Many people are wondering: will home prices fall this year? Whether you’re a potential homebuyer, seller, or both, the answer to this question matters for you. Let’s break down what’s happening with home prices, where experts say they’re headed, and how this impacts your homeownership goals.

What’s Happening with Home Prices? 

Home prices have seen 121 consecutive months of year-over-year increases. CoreLogic says:

Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”

So why are prices climbing so much? It’s because there are more buyers than there are homes for sale. This imbalance is expected to maintain that upward pressure on home prices because homes for sale are a hot commodity in today’s low-inventory housing market.

Where Do Experts Say Prices Will Go from Here?

Experts say the housing market isn’t set up for a price decline due to that ongoing imbalance between supply and demand. In the latest home price forecasts for 2022, they’re calling for ongoing appreciation throughout the year (see graph below):

Will Home Prices Fall This Year? Here’s What Experts Say | Simplifying The Market

While the experts are forecasting more moderate price appreciation, the 2022 projections show price gains will remain strong throughout this year. First American explains it like this:

While house price growth is expected to moderate from the rapid pace of 2021, strong home buyer demand against a backdrop of historically tight inventory of homes for sale will likely keep appreciation positive in the coming year.”

What Does That Mean for You?

The biggest takeaway is that none of the experts are projecting depreciation. If you’re a homeowner thinking about selling, the higher price appreciation over the last two years has been great for your home’s value, but it’s also something you should factor in when planning your next steps. If you’ll also be buying a home after selling your current house, you shouldn’t wait for prices to fall. Waiting will only cost you more in the long run because climbing mortgage rates and rising home prices will have an impact on your next home purchase. Freddie Mac says:

“If you’re thinking about waiting until next year and that maybe rates are higher, but you’ll get a deal on prices – well that’s risky. It may be more advantageous to purchase this year relative to waiting until 2023 at this time.”

Bottom Line

If you’re thinking of selling to move up, you shouldn’t wait for prices to fall. Experts say prices will continue to appreciate this year. That means, if you’re ready, buying your next home before prices climb further may make the most financial sense. Let’s connect to begin the process of selling your current home and looking for your next one before prices rise higher.

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How Today’s Mortgage Rates Impact Your Home Purchase

How Today’s Mortgage Rates Impact Your Home Purchase | Simplifying The Market

If you’re planning to buy a home, it’s critical to understand the relationship between mortgage rates and your purchasing power. Purchasing power is the amount of home you can afford to buy that’s within your financial reach. Mortgage rates directly impact the monthly payment you’ll have on the home you purchase. So, when rates rise, so does the monthly payment you’re able to lock in on your home loan. In a rising-rate environment like we’re in today, that could limit your future purchasing power.

Today, the average 30-year fixed mortgage rate is above 5%, and in the near term, experts say that’ll likely go up in the months ahead. You have the opportunity to get ahead of that increase if you buy now before that impacts your purchasing power.

Mortgage Rates Play a Large Role in Your Home Search

The chart below can help you understand the general relationship between mortgage rates and a typical monthly mortgage payment within a range of loan amounts. Let’s say your budget allows for a monthly mortgage payment in the $2,100-$2,200 range. The green in the chart indicates a payment within that range, while the red is a payment that exceeds it (see chart below):

How Today’s Mortgage Rates Impact Your Home Purchase | Simplifying The Market

As the chart shows, you’re more likely to exceed your target payment range as mortgage rates increase unless you pursue a lower home loan amount. If you’re ready to buy a home, use this as your motivation to purchase now so you can get ahead of rising rates before you have to make the decision to decrease what you borrow in order to stay comfortably within your budget.

Work with Trusted Advisors To Know Your Budget and Make a Plan

It’s critical to keep your budget top of mind as you’re searching for a home. Danielle Hale, Chief Economist at realtor.com, puts it best, advising that buyers should:

Get preapproved with where rates are today, but also consider what would happen if rates were to go up, say another quarter of a point, . . . Know what that would do to your monthly costs and how comfortable you are with that, so that if rates do move higher, you already know how you need to adjust in response.”

No matter what, the best strategy is to work with your real estate advisor and a trusted lender to create a plan that takes rising mortgage rates into consideration. Together, you can look at your budget based on where rates are today and craft a strategy so you’re ready to adjust as rates change.

Bottom Line

Even small increases in mortgage rates can impact your purchasing power. If you’re in the process of buying a home, it’s more important than ever to have a strong plan. Let’s connect so you have a trusted real estate advisor and a lender on your side who can help you strategize to achieve your dream of homeownership this season.

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2022 Housing Market Forecast [INFOGRAPHIC]

2022 Housing Market Forecast [INFOGRAPHIC] | Simplifying The Market

2022 Housing Market Forecast [INFOGRAPHIC] | Simplifying The Market

Some Highlights

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Three Tips for First-Time Homebuyers

Three Tips for First-Time Homebuyers | Simplifying The Market

Buying your first home is a major decision and an exciting milestone. Even though it can feel daunting at times, it has the power to change your life for the better. If you’re looking to purchase your first home, you may be wondering what’s happening in the housing market today, how much you need to save, and where to start.

Here are three things that can help give you the information you need to confidently pursue your dream of homeownership.

1. Consider All Options When the Number of Homes for Sale Is Low

Today, there are far more buyers in the market than there are homes available for sale. When that happens, it’s a good idea to do what you can to increase your pool of options. That could mean expanding your search to include additional housing types. For first-time buyers, considering condominiums (condos) and townhomes can be an excellent way to increase your choices. According to Bankrate:

“Townhomes often cost less than single-family homes of a similar size in the same location.”

In another article, Bankrate also says:

“Buying a condo can be a great way to dive into homeownership without worrying about the upkeep that comes with single-family homes and townhouses.”

Condos and townhomes are both great entryways into homeownership. When you buy either one, you can start building equity which increases your net worth and can fuel a future move.

2. Know Your Down Payment Could Be More Within Reach Than You Think

Saving for a down payment can feel like one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As the National Association of Realtors (NAR) says:

One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”

Data from NAR shows the median down payment hasn’t been over 20% since 2005. The graph below breaks down the median down payment by age group for recent homebuyers according to the 2022 Home Buyers and Sellers Generational Trends Report from NAR (see graph below):

Three Tips for First-Time Homebuyers | Simplifying The Market

Based on the data above, the median down payment for all homebuyers is only 13%. That’s well below the common misconception of 20%, and it’s even lower for younger buyers. This could mean you may not need to save as much for a down payment as you initially thought.

There are also down payment assistance programs available for many buyers. Not to mention, some loan options require as little as 3.5% (or even 0%) down for buyers who qualify. While there are advantages to putting 20% down, especially in today’s competitive market, know that you have options.  To get more information on how much you may need to save and the help that’s available, talk with a professional.

3. Work with a Trusted Real Estate Advisor Throughout the Process

Finally, no matter where you’re at in your homeownership journey, the best way to make sure you’re set up for success is to work with a real estate professional.

If you’re just starting out, they can help you with the initial steps, like educating you on the process and connecting you with a trusted lender to get pre-approved. Once you’re ready to begin your search, a real estate professional can help you understand your local market and search for available homes. And when it’s time to make an offer, they’ll be an expert advisor and negotiator to help your offer stand out above the rest.

Bottom Line

Knowledge is key to succeeding on your homebuying journey. Knowing market trends, what you need for a down payment, and what options you have as a buyer today can give you the confidence you need to buy a home. Let’s connect so you have an expert on your side who can help you navigate the homebuying process.

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Your House Could Be Closer to List-Ready Than You Think

Your House Could Be Closer to List-Ready Than You Think | Simplifying The Market

One of the biggest concerns for a homeowner looking to sell is the time they’ll have to put in before listing their house. If that’s the case for you, you should know – your home might be closer to list-ready than you think in today’s housing market. A survey of recent sellers from realtor.com finds that many were able to get their house ready in less than a month. It says:

“With many homeowners expecting a quick sale, and in many cases a lack of contingencies, the preparation process took less than a month for over 50% of home sellers this past year, with 20% completing it in less than two weeks.

Those sellers expecting to sell quickly are following recent buyer trends. With mortgage rates and home prices rising, buyers in today’s market are serious about finding a home quickly. But with the limited number of homes for sale, there are very few options for those buyers to choose from. That means many may be willing to take on projects after they purchase.

Because of this, you may be able to focus on less time-consuming tasks before putting your house on the market. According to the survey mentioned above, some of the top things recent sellers completed before listing over the past year include landscaping, making minor cosmetic updates, and touching-up paint (see image below):

Your House Could Be Closer to List-Ready Than You Think | Simplifying The Market

A Real Estate Advisor Will Help Streamline the Process and Keep You Focused

Of course, each situation is different, and knowing what repairs or updates your house needs to stand out in your local area is critical. That’s where a trusted real estate professional comes in. In a recent article, NextAdvisor explains:

“. . . Real estate can be hyper-local, and demand can vary from one neighborhood to the next. It’s a good idea to work with a local real estate professional to determine an ideal listing price and if any improvements or repairs need to be completed before putting your home on the market.”

Your trusted real estate advisor knows the ins and outs of the market in your specific area. They’ll help you identify the places where you should and shouldn’t spend your time and money – and that can enable you to list quickly.

Bottom Line

If you’re ready to take advantage of the incredible conditions for sellers in today’s real estate market but are worried about the time it’ll take to get your home ready, you might be closer than you think. Let’s connect so you can see what you need to do before listing your house today.

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Things That Could Help You Win a Bidding War on a Home

Things That Could Help You Win a Bidding War on a Home | Simplifying The Market

With a limited number of homes for sale today and so many buyers looking to make a purchase before mortgage rates rise further, bidding wars are common. According to the latest report from the National Association of Realtors (NAR), nationwide, homes are getting an average of 4.8 offers per sale. Here’s a look at how that breaks down state-by-state (see map below):

Things That Could Help You Win a Bidding War on a Home | Simplifying The Market

The same report from NAR shows the average buyer made two offers before getting their third offer accepted. In this type of competitive housing market, it’s important to know what levers you can pull to help you beat the competition. While a real estate professional is your ultimate guide to presenting a strong offer, here are a few things you could consider.

Offering over Asking Price

When you think of sweetening the deal for sellers, the first thought you likely have is around the price of the home. In today’s housing market, it’s true more homes are selling for over asking price because there are more buyers than there are homes for sale. You just want to make sure your offer is still within your budget and realistic for the market value in your area – that’s where a local real estate professional can help you through the process. Bankrate says:

Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. You may not have to increase it by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.”

Putting Down a Bigger Earnest Money Deposit

You could also consider putting down a larger deposit up front. An earnest money deposit is a check you write to go along with your offer. If your offer is accepted, this deposit is credited toward your home purchase. NerdWallet explains how it works:

A typical earnest money deposit is 1% to 2% of the home’s purchase price, but the amount varies by location. A higher earnest money deposit may catch a seller’s attention in a hot housing market.”

That’s because it shows the seller you’re seriously interested in their house and have already set aside money that you’re ready to put toward the purchase. Talk to a professional to see if this is something you can do in your area. 

Making a Higher Down Payment 

Another option is increasing how much of a down payment you’re going to make. The benefit of a higher down payment is you won’t have to finance as much. This helps the seller feel like there’s less risk of the deal or the financing falling through. And if other buyers put less down, it could be what helps your offer stand out from the crowd.

Non-Financial Options To Make a Strong Offer

Realtor.com points out that while increasing these financial portions of the deal can help, they’re not your only options:

. . . Price is not the only factor sellers weigh when they look at offers. The buyer’s terms and contingencies are also taken into account, as well as pre-approval letters, appraisal requirements, and the closing time the buyer is asking for.”

When it’s time to make an offer, partner with a trusted professional. They have insight into what sellers are looking for in your local market and can give you expert advice on what levers you may or may not want to pull when it’s time to write an offer.

From a non-financial perspective, this can include things like flexible move-in dates or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). For example, you could make an offer that’s not contingent on the sale of your current home. Just remember, there are certain contingencies you don’t want to forego, like your home inspection. Ultimately, the options you have can vary state-to-state, so it’s best to lean on an expert real estate professional for guidance.

Bottom Line

In today’s hot housing market, you need a partner who can serve as your guide, especially when it comes to making a strong offer. Let’s connect so you have a trusted resource and coach on how to make the strongest offer possible for your specific situation.

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Today’s Home Price Appreciation Is Great News for Existing Homeowners

Today’s Home Price Appreciation Is Great News for Existing Homeowners | Simplifying The Market

If you’re planning to sell your home this season, rising prices are great news for you. But it’s important to understand why prices are rising to begin with. One major factor is supply and demand.

In any industry, when there are more buyers for an item than there are of that item available, prices naturally rise. In those situations, buyers are willing to pay more to get the product or service they’re looking for when options are scarce. And that’s exactly what’s happening in the current real estate market.

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist at CoreLogic, puts it like this:

With so few homes, buyers are once again left with fierce competition that’s driving the share of homes that sold over the listing price up to 66% . . . With the continued imbalance between supply and demand, home prices are likely to have another year of strong gains and are expected to average about 10% growth for the year.”

Because it will take some time for housing supply to increase, experts believe prices will continue rising. The latest Home Price Expectations Survey forecasts what will happen with home prices over the next 5 years. As the graph below shows, while the rate of appreciation will moderate over the next few years, prices will continue rising through 2026:

Today’s Home Price Appreciation Is Great News for Existing Homeowners | Simplifying The Market

What This Means When You Sell Your House

If you’re a homeowner, the projection for continued price appreciation this year opens up an opportunity to move. That’s because it may give your equity a major boost. Equity is the difference between what you owe on your house and its market value. The amount of equity you have increases as you make your monthly payments and as rising home prices drive up the market value for your home.

Growing equity is a powerful tool for homeowners. When you sell your house, the equity you’ve built comes back to you in the sale. That money could be enough to cover some (if not all) of your down payment on your next home.

Of course, if you want to know how much equity you have in your current house, it’s crucial to work with a real estate professional. They follow current market trends and can help you understand your home’s value when you’re ready to sell.

What This Means for Your Next Purchase

But today’s rising home values aren’t just good news if you’re ready to sell. Because price appreciation is forecast to continue in the years ahead, you can rest assured your next home will be an investment that should grow in value with time. That’s one of several reasons why real estate has been rated the best investment in a recent Gallup poll.

Bottom Line

If you’re weighing whether or not you should sell your house this season, know rising home values may be opening up an opportunity to use equity to fuel your move. Let’s connect so you can find out how much your home is worth and to learn more about all the benefits you have in today’s market.