Are you waiting to buy a house?
Are you waiting to buy a house??
Right now is the best time to buy.
We are noticing a considerable amount of confusion in the market… home buyers and sellers are asking a lot of questions… questions like:
- Are we seeing another housing bubble?
- Will there be a major price correction in the housing market?
- Where are home prices headed?
Much of the below are market predictions from over 100 top economists, investment strategists, and housing market experts.
There is a lot of good news in this post that you can use to make sound investment decisions in today’s unique market.
Home Price Expectation Survey
Every quarter for the last 11 years, a company called Pulsenomics has put together the “Home Price Expectation Survey.” They do this by, well, surveying a distinguished panel of over 100 top economists, investment strategists, and housing market analysts.
To be on the Top 100 list, you need to have a very snazzy title and most likely work for a Major Bank, Investment Firm, University, or Real Estate Brokerage firm.
Let’s look at:
- Today’s Housing Market + Market Forecast
- Mortgage Rate Predictions
- The Cost of Waiting
- Mortgage Products that can help with Affordability
Today’s Housing Market + Market Forecast
Regardless of how you slice it, locally, our real estate prices are and are predicted to continue rising, thankfully at a slower, more healthy pace.
We see some short-term market correction, but that is different. That is the opportunity that buyers can take advantage of right now.
What is being predicted for 2022 and beyond?
This first set of numbers comes from all the major housing players: Fannie Mae, Freddie Mac, NAR, Zelman, CoreLogic, HPES (Home Price Expectation Survey), and the Mortgage Bankers Association.
For this year – 2022, the average figure for all these illustrious folks for home appreciation is 9.0%%. Home prices are still going up, just at a much more healthy rate.
Our Distinguished Panel Predicts… the Next Five Years
If you put 100 brilliant people in a room, they will not agree, nor would we want them to. There are Optimists and Pessimists, and everybody in-between.
To present this data, we are using the below Average Of All Panelists for home appreciation. The data shows 26.8% or 6.7% per year over the next five years.
Now it gets interesting; by forecasting home appreciation over the next five years, it is possible to determine if now is a good time to buy a house.
So you, our fictional home buyer, is looking at a $600,000 house with 20% down. That leaves you with a loan amount of $480,000. The $600,000 house you just purchased today is predicted to be worth $760,571 in five years. That is an increase of 26.8%.
Let’s break that down by year.
Does that sound ludicrous to you? It shouldn’t. Look at the tax-assessed value of a typical house in Boise over the last five years. It has appreciated by 114.81%.
The Best Time To Buy
A lot of the current market shift has been triggered by an increase in mortgage rates. That has made it uncomfortable for some buyers and has created much uncertainty.
Because home prices will continue to rise, the best time to buy is now. Interest rates will go down; they always do. So the solution is to purchase your home before it costs $54,000 more. (Our Year 1 example.)
Suppose that you purchase now and (boo) get the worst-case 6.0% interest rate shown in the below example. Your P&I payment would be $2,877.84 vs. a P&I payment of $2,291.59 with a 4.0% interest rate.
Ouch, your monthly payment would be $586.25 higher! That’s $7,035 a year. Nonetheless, your house is worth $54,000 more.
It is pretty easy to see that down the road; it will make a lot of sense for you to refinance into a lower rate, once the economy settles down.
The million-dollar question is always, how low will rates go? Well, we will not see rates in the 2.0% range and probably not in the 3.0% range ever again. But we should see rates in the 5.0% range in the foreseeable future.
Mortgage Rate Predictions
While it certainly doesn’t feel like it now, interest rates will decrease over time. But it is not going to be tomorrow. The Federal Reserve has to get on top of inflation and the projected recession before things start to turn back the other way.
When are mortgage rates likely to start dropping? How does spring of 2023 sound?
Predictions by Freddie Mac, Fannie Mae, the Mortgage Bankers Association, and the National Accociationof Realtors predict rates of 4.97% by 2023 3Q.
Talk with anybody who has been on this earth for very long, and they will tell you that interest rates in the fives are not high; in fact, they are more the norm if not low.
The Cost of Waiting
So again, by holding off on a home purchase for just one year, you would miss out on over one-third of the 26% home appreciation projected over the next five years. That’s $54,000.
Annual Amortization, in addition to home appreciation, you will also get the gain from paying down your loan and building even more equity.
Mortgage Products that can help with Affordability
There are several strategies to lower monthly payments for buyers:
- Seller Paid Closing Costs
- 2/1 Buydown
- Prepaid Mortgage Insurance
- Fixed Rates vs. ARMs
Seller Paid Closing Costs
The below is essential to think about when negotiating and requesting seller concessions. It’s way better financially to get a significant concession than to get a price reduction.
Paying Discount Points (Buying down the Rate)
Home buyers do not have to wait for interest rates to go down; you can take advantage of this unique time in our market and request seller concessions. We are seeing seller concessions ranging from $20,000 to 4% to $40,000 or even $80,000 on higher-end new construction homes.
Seller concessions can be used for several things, most common being seller-paid closing costs or possibly upgrades on new construction. Builder upgrades do not count toward the maximum allowed, as indicated above.
Paying Discount Points (Buying down the Rate)
Home buyers do not have to wait for interest rates to go down; you can take advantage of this unique time in our market and request seller concessions. We are seeing seller concessions ranging from $20,000 to 4% to $40,000 or even $80,000 on higher-end new construction homes.
Seller concessions can be used for several things, most common being seller-paid closing costs or possibly upgrades on new construction. Builder upgrades do not count toward the maximum allowed, as indicated above.
Let’s use the example of $40,000 in seller concession. The home buyer can choose to buy down the rate to 5.0%, using seller funds of $19,200. And spend the remaining $20,800 on builder upgrades. This saves you $300 a month and you can now feel much better about your purchase by getting a better rate.
Of the tactics mentioned above, I like paying discount points the best; the lower rate is for the life of the loan, or at least until our homebuyer chooses to refinance.
Thank you for getting through all this information. As Lenders, we often have a different perspective on the market, and it is essential that we share that information.
Dean Tucker| Loan Officer | Benchmark Mortgage, NMLS 103829 | 2535 W State Street | Boise, ID 83702 | (208) 287-1710 Office | (208) 388-0501 Fax | Apply Online: www.Tucker.Benchmark.US | Veteran Resources: www.VAHome.Loan | Secure Borrower Portal: https://app.flofiy.com
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Ark-La-Tex Financial Services, LLC d/b/a Benchmark Mortgage 5160 Tennyson Pkwy STE 1000, Plano, TX 75024. NMLS ID #2143 (www.nmlsconsumeraccess.org) 972-398-7676. Information, rates, and pricing are subject to change without prior notice at the sole discretion of Ark-La-Tex Financial Services, LLC. All loan programs are subject to borrowers meeting appropriate underwriting conditions. This is not a commitment to lend. Other restrictions may apply. (https://benchmark.us)