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Buying a Home May Make More Financial Sense Than Renting One

by The HousingCoach℠ - Matt McGrath | Aug 3, 2022

If rising home prices leave you wondering if it makes more sense to rent or buy a home in today’s housing market, consider this. It’s not just home prices that have risen in recent years – rental prices have skyrocketed as well. As a recent article from realtor.com says:

“The median rent across the 50 largest US metropolitan areas reached $1,876 in June, a new record level for Realtor.com data for the 16th consecutive month.”

That means rising prices will likely impact your housing plans either way. But there are a few key differences that could make buying a home a more worthwhile option for you.

If You Need More Space, Buying a Home May Be More Affordable

What you may not realize is that, according to the latest data from realtor.com and the National Association of Realtors (NAR), it may actually be more affordable to buy than rent depending on how many bedrooms you need. The graph below uses the median rental payment and median mortgage payment across the country to show why.

As the graph conveys, if you need two or more bedrooms, it may actually be more affordable to buy a home even as prices rise. While this doesn’t take into consideration the interest deduction or other financial advantages that come with owning a home, it does help paint the picture that it may be more affordable to buy then rent for that unit size based on nationwide averages. So, if one of the factors motivating you to move is a desire for more space, this could be the added encouragement you need to consider homeownership.

Homeownership Also Provides Stability and a Chance To Grow Your Wealth

In addition to being more affordable depending on how many bedrooms you need, buying has two other key benefits: payment stability and equity.

When you buy a home, you lock in your monthly payment with your fixed-rate mortgage. And that’s especially important in today’s inflationary economy. With inflation, prices rise across the board for things like gas, groceries, and more. Locking in your housing payment, which is likely your largest monthly expense, can provide greater long-term stability and help shield you from those rising expenses moving forward. Renting doesn’t provide that same predictability. A recent article from CNET explains it like this:

“…if you buy a house and secure a fixed-rate mortgage, that means that no matter how much prices or interest rates go up, your fixed payment will stay the same every month. That’s an advantage over renting since there’s a good chance your landlord will raise your rent to counter inflationary pressures.”

Not to mention, when you buy, you have the chance to build equity, which in turn grows your net worth. It works like this. As you pay down your home loan over time and as home values continue to appreciate, so does your equity. And that equity can make it easier to fuel a move into a future home if you decide you need a bigger home later on. Again, the CNET article mentioned above helps explain:

“Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you’re building equity in your home that you can tap into later on. When you rent, you aren’t investing in your financial future the same way you are when you’re paying off a mortgage.”

Bottom Line

If you’re trying to decide whether to keep renting or buy a home, let’s connect to explore your options. With home equity and a shield against inflation on the line, it may make more sense to buy a home if you’re able to.

A Real Estate Professional Helps You Separate Fact from Fiction

by The HousingCoach℠ - Matt McGrath | Jul 28, 2022

If you’re following the news, chances are you’ve seen or heard some headlines about the housing market that don’t give the full picture. The real estate market is shifting, and when that happens, it can be hard to separate fact from fiction. That’s where a trusted real estate professional comes in. They can help debunk the headlines so you can really understand today’s market and what it means for you.

Here are three common housing market myths you might be hearing, along with the expert analysis that provides better context.

Myth 1: Home Prices Are Going To Fall

One piece of fiction many buyers may have seen or heard is that home prices are going to crash. That’s because headlines often use similar, but different, terms to describe what’s happening with prices. A few you might be seeing right now include:

Appreciation, or an increase in home prices.
Depreciation, or a decrease in home prices.
And deceleration, which is an increase in home prices, but at a slower pace.

The fact is, experts aren’t calling for a decrease in prices. Instead, they forecast appreciation will continue, just at a decelerated pace. That means home prices will continue rising and won’t fall. Selma Hepp, Deputy Chief Economist at CoreLogic, explains:

“. . . higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

Myth 2: The Housing Market Is in a Correction

Another common myth is that the housing market is in a correction. Again, that’s not the case. Here’s why. According to Forbes:

“A correction is a sustained decline in the value of a market index or the price of an individual asset. A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.”

As mentioned above, home prices are still appreciating, and experts project that will continue, just at a slower pace. That means the housing market isn’t in a correction because prices aren’t falling. It’s just moderating compared to the last two years, which were record-breaking in nearly every way.

Myth 3: The Housing Market Is Going To Crash

Some headlines are generating worry that the housing market is a bubble ready to burst. But experts say today is nothing like 2008. One of the reasons why is because lending standards are very different today. Logan Mohtashami, Lead Analyst for HousingWire, explains:

“As recession talk becomes more prevalent, some people are concerned that mortgage credit lending will get much tighter. This typically happens in a recession, however, the notion that credit lending in America will collapse as it did from 2005 to 2008 couldn’t be more incorrect, as we haven’t had a credit boom in the period between 2008-2022.”

During the last housing bubble, it was much easier to get a mortgage than it is today. Since then, lending standards have tightened significantly, and purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash.

Bottom Line

No matter what you’re hearing about the housing market, let’s connect. That way, you’ll have a knowledgeable authority on your side that knows the ins and outs of the market, including current trends, historical context, and so much more.

What’s Causing Ongoing Home Price Appreciation?

by The HousingCoach℠ - Matt McGrath | Jul 25, 2022

If you’re thinking about making a move, you probably want to know what’s going to happen to home prices for the rest of the year. While experts say price growth will moderate due to the shifting market, ongoing appreciation is expected. That means home prices won’t fall. Here’s a look at two key reasons experts forecast continued price growth: supply and demand.

While Growing, Housing Supply Is Still Low

Even though inventory is increasing this year as the market moderates, supply is still low. The graph below helps tell the story of why there still aren’t enough homes on the market today. It uses data from the Census to show the number of single-family homes that were built in this country going all the way back to the 1970s.

The blue bars represent the years leading up to the housing crisis in 2008. As the graph shows, right before the crash, homebuilding increased significantly. That’s because buyer demand was so high due to loose lending standards that enabled more people to qualify for a home loan.

The resulting oversupply of homes for sale led to prices dropping during the crash and some builders leaving the industry or closing their businesses – and that led to a long period of underbuilding of new homes. And even as more new homes are constructed this year and in the years ahead, this isn’t something that can be resolved overnight. It’ll take time to build enough homes to meet the deficit of underbuilding that took place over the past 14 years.

Millennials Will Create Sustained Buyer Demand Moving Forward

The frenzy the market saw during the pandemic is because there was more demand than homes for sale. That drove home prices up as buyers competed with one another for available homes. And while buyer demand has moderated today in response to higher mortgage rates, data tells us demand will continue to be driven by the large generation of millennials aging into their peak homebuying years (see graph below):

Odeta Kushi, Deputy Chief Economist at First American, explains:

“. . . millennials continue to transition to their prime home-buying age and will remain the driving force in potential homeownership demand in the years ahead.”

That combination of millennial demand and low housing supply continues to put upward pressure on home prices. As Bankrate says:

“After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials.”

What This Means for Home Prices

If you’re worried home values will fall, rest assured that experts forecast ongoing home price appreciation thanks to the lingering imbalance of supply and demand. That means home prices won’t decline.

Bottom Line

Based on today’s factors driving supply and demand, experts project home price appreciation will continue. It’ll just happen at a more moderate pace as the housing market continues its shift back toward pre-pandemic levels.

Think Home Prices Are Going To Fall? Think Again

by The HousingCoach℠ - Matt McGrath | Jul 21, 2022

Over the last two years, the rate of home prices appreciated at a dramatic pace. While that led to incredible equity gains for homeowners, it’s also caused some buyers to wonder if home prices will fall. It’s important to know the housing market isn’t a bubble about to burst, and home price growth is supported by strong market fundamentals.

To understand why price declines are unlikely, it’s important to explore what caused home prices to rise so much recently, and where experts say home prices are headed. Here’s what you need to know.

Home Prices Rose Significantly in Recent Years

The graph below uses the latest data from CoreLogic to illustrate the rise in home prices over the past year and a half. The gray bars represent the dramatic increase in the rate of home price appreciation in 2021. The blue bars show home prices are still rising in 2022, but not as quickly:

You might be asking: why did home prices climb so much last year? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was extremely high, and supply was record low.

Where Experts Say Prices Will Go from Here

While housing inventory is increasing and buyer demand is softening today, there’s still a shortage of homes available for sale. That’s why the market is seeing ongoing price appreciation. Mark Fleming, Chief Economist at First American, explains it like this:

“. . .we’re still well below normal levels of inventory and that’s why even with the pullback in demand, we still see house prices appreciating. While there is more inventory, it’s still not enough.”

As a result, experts are projecting a more moderate rate of home price appreciation this year, which means home prices will continue rising, but at a slower pace. That doesn’t mean prices are going to fall. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

In other words, even with higher mortgage rates, moderating buyer demand, and more homes for sale, experts say home price appreciation will slow, but prices won’t decline.

If you’re planning to buy a home, that means you shouldn’t wait for home prices to drop to make your purchase. Instead, buying today means you can get ahead of future price increases, and benefit from the rise in prices in the form of home equity.

Bottom Line

Home prices skyrocketed in recent years because there was more demand than supply. As the market shifts, experts aren’t forecasting a drop in prices, just a slowdown in the rate of price growth. To understand what’s happening with home prices in our area, let’s connect today.

Should You Buy a Home with Inflation This High?

by The HousingCoach℠ - Matt McGrath | Jul 20, 2022

While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still going up. You no doubt are feeling the pinch on your wallet at the gas pump or the grocery store, but that news may also leave you wondering: should I still buy a home right now?

Greg McBride, Chief Financial Analyst at Bankrate, explains how inflation is affecting the housing market:

“Inflation will have a strong influence on where mortgage rates go in the months ahead. . . . Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”

No one knows how long it’ll take to bring down inflation, and that means the future trajectory of mortgage rates is also unclear. While that uncertainty isn’t comfortable, here’s why both inflation and mortgage rates are important for you and your homeownership plans.

When you buy a home, the mortgage rate and the price of the home matter. Higher mortgage rates impact how much you’ll pay for your monthly mortgage payment – and that directly affects how much you can comfortably afford. And while there’s no denying it’s more expensive to buy and finance a home this year than it was last year, it doesn’t mean you should pause your search. Here’s why.

Homeownership Is Historically a Great Hedge Against Inflation

In an inflationary economy, prices rise across the board. Historically, homeownership is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. Not to mention, as home prices continue to appreciate, your home’s value will too. That’s why Mark Cussen, Financial Writer at Investopedia, says:

“Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”

Also, no one is calling for homes to lose value. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

In a nutshell, your home search doesn’t have to go on hold because of rising inflation or higher mortgage rates. There’s more to consider when it comes to why you want to buy a home. In addition to shielding yourself from the impact of inflation and growing your wealth through ongoing price appreciation, there are other reasons to buy a home right now like addressing your changing needs and so much more.

Bottom Line

Homeownership is one of the best decisions you can make in an inflationary economy. You get the benefit of the added security of owning your home in a time when experts are forecasting prices to continue to rise.

Should I Buy a Home Right Now?

by The HousingCoach℠ - Matt McGrath | Jul 13, 2022

If you’ve been thinking about buying a home, you likely have one question on the top of your mind: should I buy right now, or should I wait? While no one can answer that question for you, here’s some information that could help you make your decision.

The Future of Home Price Appreciation

Each quarter, Pulsenomics surveys a national panel of over 100 economists, real estate experts, and investment and market strategists to compile projections for the future of home price appreciation. The output is the Home Price Expectation Survey. In the latest release, it forecasts home prices will continue appreciating over the next five years (see graph below):

As the graph shows, the rate of appreciation will moderate over the next few years as the market shifts away from the unsustainable pace it saw during the pandemic. After this year, experts project home price appreciation will continue, but at levels that are more typical for the market. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“People should not anticipate another double-digit price appreciation. Those days are over. . . . We may return to more normal price appreciation of 4%, 5% a year.”

For you, that ongoing appreciation should give you peace of mind your investment in homeownership is worthwhile because you’re buying an asset that’s projected to grow in value in the years ahead.

What Does That Mean for You?

To give you an idea of how this could impact your net worth, here’s how a typical home could grow in value over the next few years using the expert price appreciation projections from the Pulsenomics survey mentioned above (see graph below):

As the graph conveys, even at a more typical pace of appreciation, you still stand to make significant equity gains as your home grows in value. That’s what’s at stake if you delay your plans.

Bottom Line

If you’re ready to become a homeowner, know that buying today can set you up for long-term success as your asset’s value (and your own net worth) is projected to grow with the ongoing home price appreciation. Let’s connect to begin your homebuying process today.