According to a new study from Owners.com, the city of Virginia Beach, Virginia, is the country's leading home buying market.
Less than six months ago, mortgage rates exceeded 5% – the first time in seven years – and for weeks, no sign of a decline.
It was a turning point for home hunters. Struck by rising prices, meager housing choices and bidding wars, they saw the rates as one more hurdle and decided to stop, causing a drop in sales, even in the hottest markets the United States.
"It was somewhat surprising to see the magnitude and intensity of the withdrawal," said Robert Dietz, chief economist of the National Association of Home Builders. "Five percent at these price levels was enough to dissipate the wind of the housing market."
Rising housing prices continue to moderate, according to the latest data from the S & H housing price index. P CoreLogic Case-Shiller. In eight of the twenty largest cities in the United States, year-over-year price increases have fallen below 4%. (Photo: Feverpitched / iStock)
Federal Reserve Chairman Jerome Powell promised in December to be patient with further interest rate hikes and announced Wednesday that rates would not decline for the rest of the year.
Mortgage rates are at 4.5% and are not expected to increase much this year.
Here's what it means for this year's home buying market.
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More buying power
Buyers will not have to race against the clock, as in 2018, when rates started at 4.25% in January and were up half a point in April, said Mike Fratantoni, chief economist Mortgage Bankers Association.
"By the time they found a house, prices and prices had cost them," he says. "It's very frustrating for buyers."
Lower rates – a couple with an increase in wages – also contribute to affordability. The monthly payment of a $ 200,000 fixed mortgage over 30 years is $ 71 cheaper, or 4.5% versus 5%. That does not seem like much, but can make the difference for a buyer on the margins. The total interest savings over the life of the loan is more impressive at $ 21,699.
"People may not have reached the bottom of the rate cycle – no one can perfectly synchronize the markets – historically these rates remain very attractive," said John Pataky, vice president. Executive, Director of Consumption and Banking at TIAA Bank.
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Take the winnings and run
On the sellers' side, it is finally clear that more and more buyers are entering the market, thus freeing up affordable housing stocks that are desperately needed. The average mortgage balance for purchases has reached record levels because of the increased number of buyers rising, according to Fratantoni.
"It's a game of musical chairs," he said. "You need someone at the top of the hierarchy to move and this is echoing on the scale, eventually opening an entry-level home."
Inventories in general also increased slightly, mainly in the high-end, which also experienced the largest price deceleration. Perhaps the triplet of increased supply, lower prices and lower rates is enough to convince once stubborn owners to trade, adding more affordable housing to the market.
In Denver, there is anecdotal evidence that single-family homeowners are putting their homes on the market to see the appreciation of gangbusters in recent years – which has slowed considerably in the fourth quarter – and reinvesting those gains in a single unit. smaller and multi-family, says Nicole Reuth, Branch Manager at Fairway Independent Mortgage Corp. in Denver.
"We're seeing tenants coming in, saying their landlords are selling the house and they want to buy," says Reuth, a real estate investor who owns 22 properties. "These are houses under $ 500,000. Salespeople know that they have a very strong demand. "
Mark Fleming, Chief Economist at First American, takes a different view. First, rates are not low enough to eliminate the trap effect of rates, when homeowners decide not to sell their home because they have a lower mortgage rate than current levels.
"Rates should go down in the 3 highs to negate the effects for many existing homeowners," he said.
Some stocks are coming on the market, but not enough to meet the demand. He still expects a wave of first-time homebuyers to return to the market – all the more so since rates have been moderate compared to these frightening levels of 5%.
"Much of the downturn may be out of place now. Once again, we are gearing up again for a strong sellers market, "he said. "I would not be surprised that appreciation begins to pick up."
Buyers: what you can control
As a buyer, you can not control the Fed or any of the other factors that can affect long-term interest rates. But you can control a few factors that determine the interest rate you get on your mortgage.
Advance payment: The more money you spend, the lower your rate – all other factors being equal. This is because you take more risks as a buyer and you reduce the risk for your lender. On a monthly basis, you can eliminate the part of private mortgage insurance if you can get a 20% down payment.
Credit note: Lenders give the most favorable rates to people with higher credit ratings who have a positive debt repayment record. On a fixed rate mortgage loan worth $ 216,000 and a value of $ 216,000, you will get a rate lower than 4 if you have the highest level of credit – 760-850 – against a rate of 4.5% if your score is between 660 and 679, according to FICO.
Debt on income: Lenders also look at the percentage of your debt payments relative to your total monthly income. The higher the percentage, the riskier the loan. If you can, pay the debt with the highest monthly payment to reduce your DTI.
The barrier to entry into the housing market has grown so much that even wealthy people are refraining from buying a home. A study conducted in 2018 by the Joint Center for Housing Studies at Harvard University found that high-income renters rented more and more.
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