Weekend fun at home together. Rear view of a mixed race couple standing in the garden, embracing and looking at the house
If you’re a renter with a desire to become a homeowner, or a homeowner who’s decided your current house no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
What will home prices be like in 2022?
Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
Bottom Line
When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Confrontation of two different size piggy bank on yellow background.
There’s a common misconception that, as a homebuyer, you need to come up with 20% of the total sale price for your down payment. In fact, a recent survey by Lending Tree asks what is keeping consumers from purchasing a home. For over half of those surveyed, the ability to afford a down payment is the biggest hurdle.
That may be because those individuals assume a 20% down payment is necessary. While putting more money down if you’re able can benefit buyers, putting 20% down is not mandatory. As Freddie Mac puts it:
“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”
If saving that much money sounds overwhelming, you might be ready to give up on the dream of homeownership before you even begin – but you don’t have to. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today’s average down payment is only 12%. That number is even lower for first-time homebuyers, whose average down payment is only 7%.
Based on the Home Buyers and Sellers Generational Trends Report from NAR, the graph below shows an even closer look at the down payment percentage various age groups pay:As the graph shows, the only groups who put 20% or more down on average are older homebuyers who likely can use the sale of an existing home to fuel a larger down payment on their next home.
What does this mean for you?
If you’re a prospective homebuyer, it’s important to know you don’t have to put the full 20% down. And while saving for any down payment amount may feel like a challenge, keep in mind there are programs for qualified buyers that allow them to purchase a home with a down payment as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.
To understand your options, you do need to do your homework. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.
Bottom Line
Don’t let the myth of the 20% down payment halt your homebuying process before it begins. If you want to purchase a home this year, let’s connect to start the conversation and explore your options.
Businessman looking at smartphone while sitting at counter in office coworking space working on project on laptop
A lot has changed over the past year. For many people, the rise in remote work influenced what they’re looking for in a home and created a greater appetite for a dedicated home office. Some professionals took advantage of the situation and purchased a bigger home. Other people thought working from home would be temporary, so they chose to get creative and make the space they already had work for them. But recent headlines indicate working from home isn’t a passing fad.
If you’re still longing for a dedicated home office, now may be the time to find the home that addresses your evolving needs. More and more companies are delaying their plans to return to the office – others are deciding to remain fully remote permanently. According to economists from Goldman Sachs in a recent article from CNN:
“Job ads increasingly offer remote work and surveys indicate that both workers and employers expect work from home to remain much more common than before the pandemic.”
Other experts agree. A survey conducted by Upwork of 1,000 hiring managers found that due to the pandemic, companies were planning more remote work now and in the years to come. Upwork elaborates:
“The number of remote workers in the next five years is expected to be nearly double what it was before COVID-19: By 2025, 36.2 million Americans will be remote, an increase of 16.8 million people from pre-pandemic rates.”
The charts below break down their findings and compare pre- and post-pandemic percentages.
How Does This Impact Homeowners?
If you own your home, it’s important to realize that continued remote work may give you opportunities you didn’t realize you had. Since you don’t need to be tied to a specific area for your job, you have more flexibility when it comes to where you can live.
If you’re one of the nearly 23% of workers who will remain 100% remote:
You have the option to move to a lower cost-of-living area or to the location of your dreams. If you search for a home in a more affordable area, you’ll be able to get more home for your money, freeing up more options for your dedicated office space and additional breathing room.
You could also move to a location where you’ve always wanted to live – somewhere near the beach, the mountains, or simply a market that features the kind of weather and community amenities you’re looking for. Without your job tying you to a specific location, you’re bound to find your ideal spot.
If you’re one of the almost 15% of individuals who will have a partially remote or hybrid schedule:
Relocating within your local area to a home that’s further away from your office could be a great choice. Since you won’t be going in to work every day, a slightly longer commute from a more suburban or rural neighborhood may be a worthy trade-off for a home with more features, space, or comforts.
Bottom Line
If ongoing remote work is changing what you need in a home, let’s connect to find one that delivers on your new wish list.
If you’ve been in your home for longer than five years, you’re not alone. According to recent data from First American, homeowners are staying put much longer than historical averages (see graph below):As the graph shows, before 2008, homeowners sold their houses after an average of just five years. Today, that number has more than doubled to over 10 years. The housing industry refers to this as your tenure.
To really explore tenure, it’s important to understand what drives people to make a move. An article from The Balance explores some of the primary reasons individuals choose to sell their houses. It says:
“People who move for home-related reasons might need a larger home or a house that better fits their needs, . . . Financial reasons for moving include wanting a nicer home, moving to a newer home to avoid making repairs on the old one, or cashing in on existing equity.”
If you’ve been in your home for longer than the norm, chances are you’re putting off addressing one, if not several, of the reasons other individuals choose to move. If this sounds like you, here are a few things to consider:
If your needs have changed, it may be time to re-evaluate your home.
As the past year has shown, our needs can change rapidly. That means the longer you’ve been in your home, the more likely it is your needs have evolved. The Balance notes several personal factors that could lead to your home no longer meeting your needs, including relationship and job changes.
For example, many workers recently found out they’ll be working remotely indefinitely. If that’s the case for you, you may need more space for a dedicated home office. Other homeowners choose to sell because the number of people living under their roof changes. Now more than ever, we’re spending more and more time at home. As you do, consider if your home really delivers on what you need moving forward.
It’s often financially beneficial to sell your house and move.
One of the biggest benefits of homeownership is the equity your home builds over time. If you’ve been in your house for several years, you may not realize how much equity you have. According to the latest Homeowner Equity Report from CoreLogic, homeowners gained an average of $33,400 in equity over the past year.
That equity, plus today’s low mortgage rates, can fuel a major upgrade when you sell your home and purchase a new one. Or, if you’re looking to downsize, your equity can help provide a larger down payment and lower your monthly payments over the life of your next loan. No matter what, there are significant financial benefits to selling in today’s market.
Bottom Line
If you’ve been in your home for 5-10 years or more, now might be the time to explore your options. Today’s low rates and your built-up equity could provide you with the opportunity to address your evolving needs. If you feel it’s time to sell, let’s connect.
Whether you’re buying or selling – today’s housing market has plenty of good news to go around.
Buyers can take advantage of today’s mortgage rates to escape rising rents and keep monthly payments affordable. Sellers can reap the benefits of multiple offers and a fast sale.
If this sounds like good news to you, let’s connect today so you can capitalize on the unique opportunity you have in today’s market.
In today’s sellers’ market, standing out as a buyer is critical. Multi-offer scenarios and bidding wars are the norm due to the low supply of houses for sale and high buyer demand. If you’re buying this fall, you’ll want every advantage, especially when you’ve found the home of your dreams.
Below are five things to keep in mind when it’s time to make an offer.
1. Know Your Budget
Knowing your budget and what you can afford is critical to your success as a homebuyer. The best way to understand your numbers is to work with a lender so you can get pre-approved for a loan. As Freddie Macputs it:
“This pre-approval allows you to look for a home with greater confidence and demonstrates to the seller that you are a serious buyer.”
Showing sellers you’re serious can give you a competitive edge. It enables you to act quickly when you’ve found your perfect home.
2. Be Prepared To Move Fast
Speed and the pace of sales are contributing factors to today’s competitive housing market. According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the average home is on the market for just 17 days. As the report notes:
“Eighty-nine percent of homes sold in July 2021 were on the market for less than a month.”
When homes are selling fast, staying on top of the market and moving quickly are key. After you’ve worked with your agent to find the home that suits your needs, they’ll help you put together and submit your best offer as soon as possible.
3. A Real Estate Professional Can Lead You to Victory
No matter what the housing market looks like, rely on a trusted real estate advisor. As Freddie Macsays:
“The success of your homebuying journey largely depends on the company you keep. . . . be sure to select experienced, trusted professionals who will help you make informed decisions and avoid any pitfalls.”
Agents are experts in the local real estate market. They have insight into 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 may need can help your offer stand out.
4. Craft a Strong, Fair Offer
In the past, offering at or near the asking price was enough to make your offer appealing to sellers. In today’s market, that’s often not the case. According to the latest Realtors Confidence Index from NAR, 50% of offers are above the list price.
In such a competitive market, emotions and prices can run high. Having an agent to help craft a strong, fair offer is critical in these situations. Your agent can help you understand:
The market value of the home
Recent sales trends in the area
Current buyer demand
5. Understand the Seller’s Needs, but Resist Waiving Certain Contingencies
When crafting an offer, you’ll want to keep both your best interest and the interest of the seller in mind. Your trusted real estate advisor will help you consider which levers you could pull, including contract contingencies (conditions you set that the seller must meet for the purchase to be finalized). Of course, there are certain contingencies you don’t want to give up, like the home inspection.
“Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”
Bottom Line
Today’s competitive housing market makes it more important than ever to make a strong offer on a home. Let’s connect to make sure your offer rises to the top.
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