Home prices aren't declining but the news makes you think they are!
If you’ve seen the news lately about home sellers slashing prices, it’s a great example of how headlines do more to terrify than clarify. Here’s what’s really happening with prices. The bottom line is home prices are higher than they were a year ago at this time, and they’re expected to keep rising, just at a slower pace. But a recent article from Redfin notes, “Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand.” And that might make you think prices are declining. Now, while it’s true the latest report from Realtor.com also shows 16.6% of homes on the market had price reductions in May, which is up from 12.7% last May, that doesn’t mean overall home prices are falling. The key is knowing the difference between the asking price and the sold price. Understanding Asking Price vs. Sold Price In essence, the asking price, also known as a listing price, is the amount a seller hopes to get for their home when they list it. In reality, sellers can’t just put any price tag on their house and expect it to sell for top dollar. Today’s buyers are savvy customers, and when they aren’t willing to pay a premium for a home because their budgets are strained by higher mortgage rates, sellers need to adjust. And that’s what’s happening right now. Based on market factors and what offers that seller receives, that asking price can change. If a seller isn’t getting much foot traffic, you may see them revise the price and make an adjustment to reignite interest in the home – and sometimes that’s because they’ve overpriced it from the start. That’s where price reductions come in, and when you see “price drops” in a headline, it sounds like declining home prices. Mike Simonsen, CEO and Founder of Altos Research, says: “Not only is the share of homes with price cuts elevated compared to one year ago, but more price cuts are happening each week than last year.” On the other hand, the final sold price is the amount a buyer actually pays when the transaction is complete. Here’s the most important thing to note: Actual sold prices are still rising, and they’re expected to continue to do so at least over the next 5 years. What Does This Mean for Home Prices? So, while there's been an increase in price reductions recently, this doesn't mean overall home values are declining. Instead, it’s a sign that demand is moderating. And, as a result, sellers are adjusting their expectations to align with today's market reality. Even with more price reductions, home values are still growing on an annual basis, as they do nearly every year in the housing market. According to the Federal Housing Finance Agency (FHFA), home prices went up 6.6% over the last year (see below):No Caption Received This map shows how prices rose just about everywhere in the country, indicating the market is not in decline. So, while seller price reductions are often a leading indicator that prices may moderate in the months ahead, which experts have been saying for a while is expected to happen, they aren’t necessarily reason for alarm. The same article from Redfin also states: “. . .those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers. For now, the median-home sale price is up 4.3% year over year to another record high. . .” And with inventory as tight as it is today, price moderation is much more likely in upcoming months than price declines. Why This Is Good News for Buyers and Sellers For buyers, more realistic asking prices mean a better chance of securing a home at a fair price. It also means you can enter the market with more confidence, knowing prices are stabilizing rather than continuing to skyrocket. For sellers, understanding the need to adjust your asking price can lead to faster sales and fewer price negotiations. Setting a realistic price from the start can attract more serious buyers and lead to smoother transactions. Bottom Line While the uptick in price reductions might seem troubling, it’s not a cause for concern. It reflects a market adjusting to new conditions. Home prices are continuing to grow, just at a more moderate pace.
Avoid these mistakes as a buyer
The Biggest Mistakes Buyers Are Making Today Buyers face challenges in any market – and today’s is no different. With higher mortgage rates and rising prices, plus the limited supply of homes for sale, there’s a lot to consider. But, there's one way to avoid getting tripped up – and that’s leaning on a real estate agent for the best possible advice. An expert’s insights will help you avoid some of the most common mistakes homebuyers are making right now. Putting Off Pre-approval As part of the homebuying process, a lender will look at your finances to figure out what they’re willing to loan you for your mortgage. This gives you a good idea of what you can borrow so you can really wrap your head around the financial side of things before you start looking at homes. While house hunting can be a lot more fun than talking about finances, you don’t want to do this out of order. Make sure you get your pre-approval first. As CNET explains: “If you wait to get preapproved until the last minute, you might be scrambling to contact a lender and miss the opportunity to put a bid on a home.” Holding Out for Perfection While you may have a long list of must-haves and nice-to-haves, you need to be realistic about your home search. Even though your ideal state is you find a home that checks every box, you may need to be willing to compromise – especially since inventory is still low. Plus, a home that has everything you want may be too pricey. As Investopedia puts it: “When you expect to find the perfect home, you could prolong the homebuying process by holding out for something better. Or you could end up paying more for a home just because it meets all your needs.” Instead, look for something that has most of your must-haves and good bones where you can add anything else you may need down the line. Buying More House Than You Can Afford With today’s mortgage rates and home prices, there’s no arguing it’s expensive to buy a home. And while it may be tempting to stretch your finances a bit further than you’re comfortable with to make sure you get the house, you want to avoid overextending your budget. Make sure you talk to your agent about how changing mortgage rates impact your monthly payment. Bankrate offers this advice: “Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan doesn’t mean you can comfortably handle the monthly payments that come with it along with your other financial obligations. Every borrower’s case is different, so factor in your whole financial profile when determining how much house you can afford.” Not Working with a Local Real Estate Agent This last one may be the most important of all. Buying a home is a process that involves a lot of steps, paperwork, negotiation, and more. Rather than take all of this on yourself, it’s a good idea to have a pro working with you. The right agent will reduce your stress and help the process go smoothly. As CNET explains: “Attempting to buy a home without a real estate agent makes the process more arduous than it needs to be. A real estate agent can give you professional legal guidance, market expertise and support, which will save you time, money and stress. They can also increase your chances of finding the right home so you don’t have to spend hours scouring the internet for listings.” Bottom Line Mistakes can cost you time, frustration, and money. If you want to buy a home in today’s market, let’s connect so you have a pro on your side who can help you avoid these missteps.
Ways to use your tax refund when you buy a home!
Have you been saving up to buy a home this year? If so, you know there are a number of expenses involved – from your down payment to closing costs. But did you also know your tax refund can help you pay for some of these expenses? As Credit Karma explains: “If one of your goals is to stop renting and buy a home, you’ll need to save up for closing costs and a down payment on the mortgage. A tax refund can give you a start on the road to homeownership. If you’ve already started to save, your tax refund could move you down the road faster.” While how much money you may get in a tax refund is going to vary, it can be encouraging to have a general idea of what’s possible. Here’s what CNET has to say about the average increase people are seeing this year: “The average refund size is up by 6.1%, from $2,903 for 2023's tax season through March 24, to $3,081 for this season through March 22.” Sounds great, right? Remember, your number is going to be different. But if you do get a refund, here are a few examples of how you can use it when buying a home. According to Freddie Mac: Saving for a down payment – One of the biggest barriers to homeownership is setting aside enough money for a down payment. You could reach your savings goal even faster by using your tax refund to help. Paying for closing costs – Closing costs cover some of the payments you’ll make at closing. They’re generally between 2% and 5% of the total purchase price of the home. You could direct your tax refund toward these closing costs. Lowering your mortgage rate – Your lender might give you the option to buy down your mortgage rate. If affordability is tight for you at today’s rates and home prices, this option may be worth exploring. If you qualify for this option, you could pay upfront to have a lower rate on your mortgage. The best way to get ready to buy a home is to work with a team of trusted real estate professionals who understand the process and what you’ll need to do to be ready to buy. Bottom Line Your tax refund can help you reach your savings goal for buying a home. Let’s talk about what you’re looking for, because your home may be more within reach than you think.
Should I move with todays mortgage rates?
When mortgage rates spiked up over the last few years, some homeowners put their plans to move on pause. Maybe you did too because you didn’t want to sell and take on a higher mortgage rate for your next home. But is that still the right strategy for you? In today’s market, data shows more homeowners are getting used to where rates are and thinking it may be time to move. As Mark Zandi, Chief Economist at Moody’s Analytics, explains: “Listings are up a bit as life events and job changes are putting increasing pressure on locked-in homeowners to sell their homes. Homeowners may also be slowly coming to the realization that mortgage rates aren’t going back anywhere near the rate on their existing mortgage.” A recent study from Bank of America sheds light on some of the things homeowners say would make them sell, even with rates where they are right now (see visual below): a group of blue and white icons What Would Motivate You To Move? Now that you know why other people would move, take a minute to think about what would make a move worth it for you. Is it time to take a chance and go for your dream job, even though it’s not local? Are you looking for a neighborhood that has more to offer and a close-knit sense of community? Maybe you just need more space, you’re looking for your next great adventure, or you want a house that opens up rental opportunities to pad your income. And here’s something else to consider. Mortgage rates are still expected to go down over the course of the year. And once that happens, there’s going to be a big rush of buyers jumping back into the market. While you could delay your plans until rates drop, you’ll only have more competition with those buyers if you do. So, does that mean it’s worth it to move now, even with rates where they are? The answer is: that it depends. You'll want to consider today’s mortgage rates, where they’re expected to go from here, and what would prompt you to want to make a change as you decide on your next steps. An expert can help with that. Bottom Line Other homeowners are getting used to rates and deciding to move. Let’s chat to go over what matters most to you and if it’s time for you to jump back into the market too.
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