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Trying To Buy a Home? Hang in There.

We’re still in a sellers’ market. And if you’re looking to buy a home, that means you’re likely facing some unique challenges, like difficulty finding a home and volatile mortgage rates. But keep in mind, there are some benefits to being a buyer in today’s market that give you good reason to stick with your search. Here are a few of them.

Long-Term Benefits Outweigh Short-Term Challenges

Owning a home grows your net worth – and since building that wealth takes time, it makes sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity. Freddie Mac puts it this way:

“Homeownership not only builds a sense of pride and accomplishment, but it’s also an important step toward achieving long-term financial stability.”

The key there is long-term because the financial benefits homeownership provides, like home value appreciation and equity, grow over time. Those benefits are worth the short-term challenges today’s sellers’ market presents.

Mortgage Rates Are Constantly Changing

Mortgage rates have been hovering around 6.5% over the last several months. However, as Sam Khater, Chief Economist at Freddie Mac, notes, they’ve been coming down some recently:

“Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market . . .”

Lower mortgage rates improve your purchasing power when you buy, and that can help make homeownership more affordable. Hannah Jones, Economic Data Analyst at realtor.com, explains:

“As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”

The recent drop in mortgage rates is good news if you couldn’t afford to buy a home when they peaked.

Home Prices Will Increase

According to the Home Price Expectation Survey, which polls over 100 real estate experts, home values will go up steadily over the next few years after a slight decline this year (see graph below):

Rising home prices in the coming years means two things for you as a buyer:

  • Waiting to buy a home could mean it’ll become more expensive to do so.
  • Buying now means the value of your home, and your net worth, will likely grow over time.
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Why Buying a Home Is a Sound Decision

If you’re thinking about buying a home, you want to know the decision will be a good one. And for many, that means thinking about what home prices are projected to do in the coming years and how that could impact your investment.

This year, we aren’t seeing home prices fall dramatically. As the year goes on, however, some markets may go up in value while others may lose value. That’s why it’s helpful to keep the long-term view in mind. Experts project a return to a steadier rate of price appreciation in the years that follow.

Home Price Appreciation in the Years Ahead

Over 100 economists, investment strategists, and housing market analysts were polled by Pulsenomics in their latest quarterly Home Price Expectation Survey (HPES). The report indicates what they believe will happen with home prices over the next five years. As the graph below shows, after mild depreciation this year, these experts forecast home prices will return to more normal levels of appreciation through 2027.

The big takeaway is experts aren’t forecasting a drastic fall in home prices nationally, even though some markets will see home price appreciation while others may depreciate. And when they look further out, they see steady price appreciation in the long run. That’s a great example of why homeownership wins over time.

What Does This Mean for You?

Once you buy a home, price appreciation raises your home’s value, and that grows your household wealth. Here’s how a typical home’s value could change over the next few years using the expert price appreciation projections from the survey mentioned above (see graph below):

In this example, if you bought a $400,000 home at the beginning of this year and factor in the forecast from the HPES, you could accumulate over $54,000 in household wealth over the next five years. So, if you’re wondering if buying a home is a sound decision, keep in mind what a strong wealth-building tool it is long term.

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What’s Ahead for Home Prices in 2023

Over the past year, home prices have been a widely debated topic. Some have said we’ll see a massive drop in prices and that this could be a repeat of 2008 – which hasn’t happened. Others have forecasted a real estate market that could see slight appreciation or depreciation depending on the area of the country. And as we get closer to the spring real estate market, experts are continuing to forecast what they believe will happen with home prices this year and beyond.

Selma Hepp, Chief Economist at CoreLogic, says:

While 2023 kicked off on a more optimistic note for the U.S. housing market, recent mortgage rate volatility highlights how much uncertainty remains. Nevertheless, the continued shortage of for-sale homes is likely to keep price declines modest, which are projected to top out at 3% peak to trough.”

Additionally, every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts regarding their five-year expectations for future home prices in the United States. Here’s what they said most recently:

So, given this information and what experts are saying about home prices, the question you might be asking is: should I buy a home this spring? Here are three reasons you should consider making a move:

  1. Buying a home helps you escape the cycle of rising rents. Over the past several decades, the median price of rent has risen consistently. The bottom line is, rent is going up.
  2. Homeownership is a hedge against inflation. A key advantage of homeownership is that it’s one of the best hedges against inflation. When you buy a home with a fixed-rate mortgage, you secure your housing payment, so it won’t go up like it would if you rent.
  3. Homeownership is a powerful wealth-building tool. The average net worth of a homeowner is $255,000 compared to $6,300 for a renter.

Experts are projecting slight price depreciation in the housing market this year, followed by steady appreciation. Given that, you may be wondering if you should move ahead with buying a home this spring. The decision to purchase a home is best made when you do it knowing all the facts and have an expert on your side.

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What Buyer Activity Tells Us About the Housing Market

Though the housing market is no longer experiencing the frenzy of a year ago, buyers are showing their interest in purchasing a home. According to U.S. News:

“Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market.”

That activity can be seen in the latest ShowingTime Showing Index, which is a measure of buyers actively touring available homes (see graph below):

The 62% jump in showings from December to January is one of the largest on record. There were also more showings in January than in any other month since last May. As you can see in the graph, it’s normal for showings to increase early in the year, but the jump this January was larger than usual, and a lot of that has to do with mortgage rates. Michael Lane, VP of Sales and Industry at ShowingTime+, explains:

“It’s typical to see a seasonal increase in home showings in January as buyers get ready for the spring market, but a larger increase than any January before after last year’s rapid cooldown is significant. Mortgage rate activity this spring will play a big role in sales activity, but January’s home showings are a positive sign that buyers are getting back out there . . .”

It’s important to note that mortgage rates hovered in the low 6% range in January, which played a role in the high number of showings. What does this mean? When mortgage rates eased, buyer interest climbed. The jump in home showings early this year makes one thing clear – while rates may be volatile right now, there are interested buyers out there, and when mortgage rates are favorable, they’re ready to make their move. 

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Balancing Your Wants and Needs as a Homebuyer This Spring

Though there are more homes for sale now than there were at this time last year, there’s still an undersupply with fewer houses available than in more normal, pre-pandemic years. The Monthly Housing Market Trends Report from realtor.com puts it this way: 

“While the number of homes for sale is increasing, it is still 43.2% lower than it was before the pandemic in 2017 to 2019. This means that there are still fewer homes available to buy on a typical day than there were a few years ago.”

The current housing shortage has an impact on how you search for a home this spring. With limited options on the market, buyers who consider what’s a necessity versus what’s a nice-to-have will be more successful in their home search.

The first step? Get pre-approved for a mortgage. Pre-approval helps you better understand what you can borrow for your home loan, and that plays an important role in how you’ll put your list together. After all, you don’t want to fall in love with a home that’s out of reach. Once you have a good grasp on your budget, the best way to prioritize all the features you want and need in a home is to put together a list.

Here’s a great way to think about them before you begin:

  • Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle.
  • Nice-To-Haves – These are features you’d love to have but can live without. Nice-to-haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of the these, it’s a contender.
  • Dream State – This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner.

Finally, once you’ve created your list and categorized it in a way that works for you, discuss it with your real estate agent. They’ll be able to help you refine the list further, coach you through the best ways to stick to it and find a home in your area that meets your needs.

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An Expert Gives You Clarity in Today’s Housing Market

The housing market has been going through shifts lately. That’s why it’s so important to work with an industry professional who can be your guide throughout the process.

A real estate expert uses their knowledge of what’s really happening with home prices, housing supply, expert projections, and more to give you the best advice. Someone who can provide clarity like that is critical right now. Jay Thompson, Real Estate Industry Consultant, explains:

“Housing market headlines are everywhere. Many are quite sensational, ending with exclamation points or predicting impending doom for the industry. Clickbait, the sensationalizing of headlines and content, has been an issue since the dawn of the internet, and housing news is not immune to it.”

Unfortunately, when information in the media isn’t clear, it can generate a lot of fear and uncertainty in the market. As Jason Lewris, Co-Founder and Chief Data Officer at Parcl, says:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”

But it doesn’t have to be that way. Buying a home is a big decision, and it should be one you feel confident making. You can lean on an expert to help you separate fact from fiction and get the answers you need.

The right agent can help you understand what’s happening at the national and local levels, and they can debunk headlines using data you can trust. Experts have in-depth knowledge of the industry and can provide context, so you know how current trends compare to the normal ebbs and flows in the industry, historical data, and more.

Then, to make sure you have the full picture, an agent can tell you if your local area is following the national trend or if they’re seeing something different in your market. Together, you can use all that information to make the best possible decision.

After all, making a move is a potentially life-changing milestone. It should be something you feel ready for and excited about. And that’s where a trusted expert comes in.

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Leverage Your Equity When You Sell Your House

One of the benefits of being a homeowner is that you build equity over time. By selling your house, that equity can be used toward purchasing your next home. But before you can put it to use, you should understand exactly what equity is and how it grows. Bankrate explains it like this:

“Home equity is the portion of your home you’ve paid off – in other words, your stake in the property as opposed to the lender’s. In practical terms, home equity is the appraised value of your home minus any outstanding mortgage and loan balances.”

Majority of Americans Have a Large Amount of Equity

If you’ve owned your home for a while, you’ve likely built up some equity – and you may not even realize how much. Based on data from the U.S. Census Bureau and ATTOM, the majority of Americans have a substantial amount of equity right now (see graph below):

And having such large amounts of equity is a benefit to homeowners in more ways than one. Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, explains:

“Record levels of home equity provide security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008.”

Over time, your home equity grows. In addition to providing financial stability while you own your house, when you’re ready to sell it, that money could go a long way toward paying for your next home. 

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4 Tips for Making Your Best Offer on a Home

Are you planning to buy a home this spring? Though things are more balanced than they were at the height of the pandemic, it’s still a sellers’ market. So, when you find the home you want to buy, remember these four tips to make your best offer.

1. Lean on a Real Estate Professional

Rely on an agent who can support your goals. As Bankrate notes:

“. . . select the best real estate agent for your needs. They will be a critical part of your home buying process.”

Agents are local market experts. They know what’s worked for other buyers in your area and what sellers may be looking for in an offer. It may seem simple, but catering to what a seller needs can help your offer stand out.

2. Know Your Budget

Understanding your budget is especially important right now. As Sandy Higgins, Senior Wealth Advisor at Capstone Financial Advisors, puts it:

“Understand your current budget … what are your expenses, how’s your spending, would you need to make changes?”

The best way to understand your numbers is to work with a lender so you can get pre-approved for a loan. It helps you be more financially confident, and it shows sellers you’re serious. That can give you a competitive edge.

3. Think Through Everything Before Making an Offer

Today’s market isn’t moving at the record pace it did during the pandemic. That means you may have a bit more time to think before you need to make an offer. According to Danielle Hale, Chief Economist at realtor.com:

“In general, you likely have more time to make an offer, although that’s certainly not a guarantee. If you’re on the fence about a home or its asking price doesn’t quite fit your budget, you might want to keep an eye on it, and if it doesn’t sell right away, you may have some room to negotiate with the seller.”

While it’s still important to stay on top of the market and be prepared to move quickly, there can be more flexibility today. Lean on the advice of your agent as you explore the options in your market.

4. Work with Your Advisor To Negotiate

During the pandemic, some buyers skipped home inspections or didn’t ask for concessions from the seller in order to submit the winning bid on a home. Fortunately, today’s market is different, and you may have more negotiating power than before. When putting together an offer, your trusted real estate advisor will help you think through what levers to pull.

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Could a Multigenerational Home Be the Right Fit for You?

During the pandemic, many of us reexamined the meaning of home for ourselves and our loved ones. Today, that can be seen in the recent rise in multigenerational households. According to Jessica Lautz, Deputy Chief Economist and Vice President of Economic Research at the National Association of Realtors (NAR):

“Multi-generational buying may be a home where families live in the same home with elderly parents, children who have boomeranged back home, or other extended family members. While this is not a new concept of living, it is one which has gained recent popularity.”

And citing data from Pew Research Center, the Wall Street Journal (WSJ) says:

“. . . multigenerational living has made a comeback in recent years, particularly after the 2008 financial crisis and during the pandemic.”

So, if buying a multigenerational home has crossed your mind, you aren’t alone. Depending on what stage of homeownership you’re in, there are different reasons it could be the right fit. The chart below shows responses to a recent survey from NAR about the reasons people have bought a multigenerational home:

Whether your motives are financial or focused on the people you’ll share your home with, a multigenerational home has distinct advantages. It can make homeownership more affordable, and it can help you best support your loved ones. As Lautz explains:

“Multi-generational home buying is a way for families to care for one another, support one another, and often buy a home that may have been previously out of reach. . . . The trend of multigenerational buying appears to be firmly established and one that could expand in the future.”