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What You Can Expect from the Spring Market

With the spring housing market underway, many of you are probably curious about what you can expect when it comes to buying or selling a house. While there are multiple factors causing some uncertainty, the housing market seems to be relatively immune from the impacts of the war in Ukraine, rising inflation, and the first rate increase from the Federal Reserve in over three years.

Here’s a look at what the real experts say you can expect this spring.

1. Mortgage Rates Will Climb

Freddie Mac reports the 30-year fixed mortgage rate has increased by more than a full point in the past six months. And despite some mild fluctuation in recent weeks, experts believe rates will continue to edge up over the next 90 days. As Freddie Mac says: “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of they year.”

If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.

2. Housing Inventory Will Increase

There may be some relief coming for buyers searching for a home to purchase.

 Realtor.com recently reported that the number of newly listed homes has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced the months’ supply of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.

On Cape Cod, there were a little over 200 new listings in January. In February that number was over 400. While that’s not close to normal inventory, it is trending in the right direction.

Anecdotally, our colleagues at our Today Real Estate company wide meetings seem to be talking more about new listings than they have in a while.

If you’re a buyer and have been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right one.

If you’re a seller, listing now instead of waiting for additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.

3. Home Prices Will Rise

Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong.

As realtor.com explains in their most recent Housing Report: “During the final two weeks of the month, more new sellers entered the market than during the same time last year…However, with millions of millennials at first-time buying ages, housing supply faces a long road catching up with demand.”

What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.

Won’t Increasing Mortgage Rates Cause Home Prices To Fall?

While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Maesays: “What I will caution against is making the inference that interest rates have a direct impacting on house prices. That is not true.”

Freddie Mac studied the impact that mortgage rates increasing by at least 1% had on home prices in the past. Here are the results of that study:

What You Can Expect from the Spring Housing Market | MyKCM

As the chart shows, mortgage rates jumped by at least 1% six times in the last 30 years. In each case, home values increased.

So again, if you’re a first-time buyer or a repeat buyer, waiting to likely means you’ll pay more for a home later in the year (as compared to its current value).

Bottom Line

Three things seem certain going into the spring housing market:

  1. Mortgage rates will continue to rise.
  2. The selection of homes available for sale will modestly improve.
  3. Prices will continue to appreciate, just at a slightly slower pace.

Curious about your options? We’re happy to answer your questions. Let’s connect at 508-360-5664 or msennott@todayrealestate.com.

It’s important that you have the right information to make an educated and informed decision.

Enjoy your week…

Mari and Hank

The Big Question: Should You Renovate or Move?

The last 18 months changed what many buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey reveals the following:

  • 70% of respondents want more outdoor living space
  • 69% of respondents want a home office (48% wanted multiple offices)
  • 46% of respondents want a multi-function room/flexible space
  • 42% of respondents want an au pair/in-law suite
  • 39% of respondents want an exercise room/yoga space

If you’re a homeowner who wants to add any of the above, you have two options: renovate your current house or buy a home that already has the spaces you desire. The decision you make could be determined by factors like:

  1. A possible desire to relocate
  2. The difference in the cost of a renovation versus a purchase
  3. Finding an existing home or designing a new home that has exactly what you want (versus trying to restructure the layout of your current house)

In either case, you’ll need access to capital for either the funds for the renovation or the down payment your next home would require. The great news is that the money you need probably already exists in your current home in the form of equity.

Home Equity Is Skyrocketing

The Big Question: Should You Renovate or Move? | MyKCM

The record-setting increases in home prices over the last two years dramatically improved homeowners’ equity. The graph above uses data from CoreLogic to show the average home equity gain in the first quarter of the last nine years.

As a homeowner you have options. However, waiting to make your decision may increase the cost of tapping that equity.

If you decide to renovate, you’ll need to refinance (or take out an equity loan) to access the equity. If you decide to move instead and use your equity as a down payment, you’ll still need to mortgage the remaining difference between the down payment and the cost of your next home.

Mortgage rates are forecast to increase over the next year. Waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.

If you’re ready to either redesign your current house or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. To do that, you’ll need two things:

  1. The current mortgage balance on your home
  2. The current value of your home

You can locate the balance on your monthly mortgage statement. To find the current market value of your house, you could pay several hundreds of dollars for an appraisal, or visit our website at www.makeyourmovewithmari.com/evaluation where you can receive a free report. We’re happy to help.

Have a great week….

Mari and Hank