Is Home Affordability on the Mend?
In recent years, buying a home has been a significant challenge for many. While affordability remains a hurdle, there's a glimmer of improvement on the horizon. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), notes: “Housing affordability is improving ever so modestly, but it is moving in the right direction.” Let’s break down the latest data on the three main factors influencing home affordability: mortgage rates, home prices, and wages. 1. Mortgage Rates Mortgage rates have been fluctuating this year, ranging from the mid-6% to low 7% mark. However, there’s some positive news. According to Freddie Mac, rates have generally been on a downward trend since May (see graph below): Recent economic, employment, and inflation data have contributed to this trend. While some rate volatility is likely, experts suggest that if the cooling trend in economic data continues, mortgage rates could keep decreasing. Even a slight drop in rates can make a significant difference. Lower rates can make your monthly payments more manageable. Just don’t expect rates to revert to the 3% range. 2. Home Prices Home prices have continued to climb this year, but the pace of growth has slowed compared to the pandemic highs. The graph below, using data from Case-Shiller, highlights this deceleration: For potential homebuyers, this slower increase in prices is encouraging. The rapid price hikes of the past few years made homeownership seem distant for many. With more gradual price increases, purchasing a home might feel more attainable. As Odeta Kushi, Deputy Chief Economist at First American, observes: “While housing affordability remains tight fo r many first-time buyers, slower price appreciation combined with lower mortgage rates could make the dream of homeownership more reachable.” 3. Wages Wages have been on the rise, as depicted in the graph below using Bureau of Labor Statistics (BLS) data: The graph shows the typical annual wage growth (blue dotted line) and the current accelerated growth (green line). Higher wages mean you have more income to allocate towards your mortgage, easing the burden of homeownership. Bottom Line When you consider all these factors together—trending lower mortgage rates, slower home price growth, and rising wages—the signs are encouraging. While affordability is still a challenge, these trends suggest that things may be starting to improve.
Is the Housing Market Offering More Choices Where You Are?
One of the most encouraging trends in today’s real estate market is the increase in the number of homes available for sale. Recent insights from Realtor.com reveal that, nationwide, the number of homes listed for sale has surged by 36.6% compared to this time last year. This is a significant boost, providing you with far more choices than you would have had just a year ago. With this rise in inventory, buyers are also regaining some negotiating power. If you’ve been hesitant to enter the market due to the tight inventory in recent years, this development should be a welcome change. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), puts it this way: “Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions.” However, it’s important to keep in mind that even with this improvement, the market hasn’t flipped to an oversupply of homes. We’re still far from having enough homes for sale to drive prices down significantly. When comparing today’s inventory to the more typical pre-pandemic levels (2017–2019), there are still about 29% fewer homes available (see graph below). So, while we’re seeing a nearly 37% year-over-year increase, we haven’t fully returned to the inventory levels of a normal market. Bill McBride, a Housing Analyst for Calculated Risk, notes: “ . . . currently, inventory is increasing year-over-year but is still well below pre-pandemic levels.” This situation is expected as it will take time for the market to fully recover to typical inventory levels. The silver lining for buyers is that in some regions, inventory is getting closer to what we’d expect in a balanced market. Here’s a snapshot of how inventory growth is unfolding across different regions (see graph below): Real estate markets are highly localized, so to get a clear picture of what’s happening in your area, it’s best to consult a local real estate agent. They can provide insights into the inventory trends where you live and how they compare to national patterns. You might discover even more opportunities to find the right home in your area. Bottom LineThe national housing supply is on the rise, offering buyers more options. This could be your chance to find a home that fits your needs. What are you looking for in a home? And what’s your budget? Let’s explore the options together to find the best fit for you.
Where Will You Go After You Sell Your Home?
Selling your home can be an exciting adventure, but it often raises the big question: Where will you go next? For many homeowners looking to sell and move, the prospect of finding the right new home might seem daunting due to the well-known shortage of available options. However, the landscape is shifting. This year, many markets have seen an increase in the number of homes for sale, and that includes both existing homes and newly constructed ones. So, which path should you take? Should you invest in a charming existing home, or go for a shiny, brand-new one? The decision is yours, and it hinges on what matters most to you in your next home. Benefits of Buying a Newly Built Home If you're considering purchasing a newly built home, here are some compelling advantages to keep in mind: Brand New Everything: Enjoy the luxury of being the first to use brand-new appliances, materials, and finishes in your home. Energy Efficiency: New homes often come with modern, energy-efficient options that can help you save on utility bills while reducing your carbon footprint. Minimal Repairs: With everything being new, you’ll face fewer maintenance issues and enjoy peace of mind with builder warranties. Builder Incentives: Builders are currently eager to sell their existing inventory and are often willing to offer concessions and negotiate deals to make sales happen. This can make buying a new home more affordable. Interestingly, the trend towards building smaller, more affordable homes means that the median price of newly built homes is often lower than that of existing homes. Ralph McLaughlin, Senior Economist at Realtor.com, notes: "Homebuyers who are looking for that 'new-home smell' may find a friendlier market now, as new homes are often more competitively priced compared to existing ones." Curious about what new homes are available in your area? Your real estate agent can provide valuable insights into local builders, new communities, and the ins and outs of builder contracts. Advantages of Purchasing an Existing Home On the flip side, there are many appealing reasons to consider an existing home: Established Neighborhoods: Buying an existing home often means moving into a well-established neighborhood, giving you a sense of community and familiarity before you even settle in. Variety of Styles: Existing homes offer a wide array of architectural styles and floor plans, allowing you to find something truly unique and suited to your taste. Lived-in Charm: Older homes come with character and charm that newer homes might lack, from intricate woodwork to vintage fixtures. Mature Landscaping: Many existing homes boast mature trees and landscaping that offer privacy and curb appeal, something that can take years to cultivate in a new home. Beyond these lifestyle benefits, existing homes offer strategic advantages. You can always update and personalize an older home with modern features, merging the charm of the past with contemporary trends. Such upgrades not only enhance your living experience but can also increase the resale value of your home. As an article from LendingTree highlights: “. . . they can personalize it and possibly increase its potential resale value with cosmetic upgrades . . . Plus, if a home comes with physical details or stories that add charm, in some cases, these elements are attractive enough to add to a home’s resale value . . .” If you're interested in exploring existing homes, your real estate agent is your best ally, providing access to a comprehensive list of available homes that meet your criteria. Conclusion Deciding whether to buy an existing home or a newly built one after selling your current property involves careful consideration of various factors. Understanding the unique opportunities each option presents is crucial in today's market. Let’s connect so you have expert guidance to explore the available choices in our area, helping you find the perfect place to call home.
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