People Are Still Moving, Even with Today’s Affordability Challenges

If you’re thinking about buying or selling a home, you might have heard that it’s tough right now because mortgage rates are higher than they’ve been over the past few years, and home prices are rising. That much is true. Take a look at the graph below. It breaks down how the current affordability situation stacks up to recent years.

The National Association of Realtors (NAR) explains how to read the values on the graph:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.”

The black dotted line represents that 100 value on the index. Essentially, the higher the bar, the more affordable homes are. As you can see, the orange bar for today shows higher mortgage rates and home prices have created a clear challenge. But, while affordability is definitely tighter right now, that doesn’t mean the housing market is at a standstill.

Unlocking the Real Estate Puzzle: Navigating Affordability and Market Dynamics

Understanding the housing market indices can be like deciphering a secret code. A value of 100 signifies that a family with median income has precisely the right financial standing to qualify for a mortgage on a home with a median price. Visualizing this, the black dotted line serves as a marker for this crucial 100 value on the index. The rule of thumb is simple: the higher the bar, the more affordable homes become.

Today’s reality, represented by the orange bar, reveals a challenge as higher mortgage rates and home prices tighten affordability. However, don’t let this mislead you into thinking the housing market is stagnant. Despite the current constraints, the market is alive and dynamic.

Recent statistics from the National Association of Realtors (NAR) shed light on the pace of sales. Just under 4 million homes are projected to be sold this year. Let’s break down the numbers to understand the implications:

• 3.96 million homes divided by 365 days in a year = 10,849 houses sold each day
• 10,849 divided by 24 hours in a day = 452 houses sold per hour
• 452 divided by 60 minutes in an hour = approximately 8 houses sold each minute

This means, on average, over 10,000 homes change hands daily in the country. Whether you’re looking to buy or sell, this demonstrates that opportunities abound even in times of tightened affordability.

The Agent Advantage: Making Your Move a Reality

You might be curious about how other homebuyers and sellers are navigating these conditions. In today’s real estate landscape, a pivotal player is the trusted local real estate agent. These professionals are instrumental in guiding individuals through the intricacies of the current market and affordability challenges.

A skilled agent can provide personalized advice tailored to your specific preferences, needs, and budget. Their wealth of experience allows them to share insights on what strategies are proving successful for other buyers and sellers. This might involve expanding your search to include various housing types like condos, townhouses, or exploring neighborhoods a bit further out to counteract affordability challenges.

The Bottom Line: The Market is Moving

Despite the perception of tightened affordability, the reality is that people are actively engaged in buying and selling homes. While the cost of homeownership has increased over the past couple of years, the real estate market is far from dormant.

If you’re contemplating a move, know that others are successfully achieving their goals, thanks in large part to the expertise and guidance of skilled local real estate agents. Ready to discuss your own move? Let’s connect with and turn your real estate aspirations into reality!

Explaining Today’s Mortgage Rates

If you’re following mortgage rates because you know they impact your borrowing costs, you may be wondering what the future holds for them. Unfortunately, there’s no easy way to answer that question because mortgage rates are notoriously hard to forecast.

But, there’s one thing that’s historically a good indicator of what’ll happen with rates, and that’s the relationship between the 30-Year Mortgage Rate and the 10-Year Treasury Yield. Here’s a graph showing those two metrics since Freddie Mac started keeping mortgage rate records in 1972:

As the graph shows, historically, the average spread between the two over the last 50 years was 1.72 percentage points (also commonly referred to as 172 basis points). If you look at the trend line you can see when the Treasury Yield trends up, mortgage rates will usually respond. And, when the Yield drops, mortgage rates tend to follow. While they typically move in sync like this, the gap between the two has remained about 1.72 percentage points for quite some time. But, what’s crucial to notice is that spread is widening far beyond the norm lately (see graph below):

If you’re asking yourself: what’s pushing the spread beyond its typical average? It’s primarily because of uncertainty in the financial markets. Factors such as inflation, other economic drivers, and the policy and decisions from the Federal Reserve (The Fed) are all influencing mortgage rates and a widening spread.

Why Does This Matter for You?

This may feel overly technical and granular, but here’s why homebuyers like you should understand the spread. It means, based on the normal historical gap between the two, there’s room for mortgage rates to improve today.

And, experts think that’s what lies ahead as long as inflation continues to cool. As Odeta Kushi, Deputy Chief Economist at First American, explains:

“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal . . . However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”

Similarly, an article from Forbes says:

“Though housing market watchers expect mortgage rates to remain elevated amid ongoing economic uncertainty and the Federal Reserve’s rate-hiking war on inflation, they believe rates peaked last fall and will decline—to some degree—later this year, barring any unforeseen surprises.”

Bottom Line

If you’re either a first-time home buyer or a current homeowner thinking of moving into a home that better fits your current needs, keep on top of what’s happening with mortgage rates and what experts think will happen in the coming months.

Why Buyers Need an Expert Agent by Their Side

The process of buying a home can feel a bit intimidating, even under normal circumstances. But today’s market is still anything but normal. There continues to be a very limited number of homes for sale, and that’s creating bidding wars and driving home prices back up as buyers compete over the available homes.

Navigating all of this can be daunting if you’re trying to do it alone. That’s why having a skilled expert to guide you through the homebuying process is essential, especially today. Bankrate shares this perspective:

“Advice and guidance from a professional real estate agent can be invaluable, particularly amid a hot or unpredictable housing market.”

Here are just a few of the ways a real estate expert makes a big difference:

• Experience – Real estate professionals know the ins and outs of what’s happening today, how it impacts buyers, and how to navigate any hurdles that may pop up.
• Education – Knowledge is power when it comes to buying a home. Your advisor will simply and effectively explain market conditions and translate what they mean for you so you can feel confident in your decision.
• Negotiations – Your real estate advisor advocates for your best interests. Having an expert on your side provides assistance with the purchase agreement. An agent can also help you negotiate potential seller concessions if the inspection reveals issues with the home.
• Contracts – Real estate advisors guide you through the disclosures and contracts necessary in today’s heavily regulated environment.
• Pricing – Making an offer and negotiating with a seller can be one of the most difficult and stressful parts of the homebuying process. A skilled agent will help you understand what similar homes are selling for so you have the full picture of what you may want to offer.

All of these reasons combined may be why 86% of recent buyers used an agent according to the latest Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR). NAR also has this to say about why an agent is so essential today:

“A great real estate agent will guide you through the home search with an unbiased eye, helping you meet your buying objectives while staying within your budget. Agents are also a great source when you have questions about local amenities, utilities, zoning rules, contractors, and more.” 

What’s the Key To Choosing the Right Expert?

It starts with trust. You’ll want to know you can trust the advice they’re giving you, so you need to make sure you’re connected with a true professional. No one can provide perfect advice because it’s impossible to know exactly what’s going to happen at every turn – especially in today’s market. But a true professional can give you the best possible advice based on the information and situation at hand.

They’ll help advocate for you throughout the process and coach you on the essential knowledge you need to make confident decisions. That’s exactly what you want and deserve.

Bottom Line

It’s critical to have an expert on your side who is skilled in navigating today’s housing market. If you’re planning to buy a home this year, let’s connect so you have a real estate advisor on your side to give you the best advice and guide you along the way.

Think Twice Before Waiting for Lower Home Prices

As the housing market continues to change, you may be wondering where it’ll go from here. One factor you’re probably thinking about is home prices, which have come down a bit since they peaked last June. And you’ve likely heard something in the news or on social media about a price crash on the horizon. As a result, you may be holding off on buying a home until prices drop significantly. But that’s not the best strategy.

A recent survey from Zonda shows 53% of millennials are still renting right now because they’re waiting for home prices to come down. But here’s the thing: the most recent data shows that home prices appear to have bottomed out and are now on the rise again. Selma Hepp, Chief Economist at CoreLogic, reports:

“U.S. home prices rose by 0.8% in February . . . indicating that prices in most markets have already bottomed out.”

And the latest data from Black Knight shows the same shift. The graph below compares home price trends in November to those in February:

So, should you keep waiting to buy a home until prices come down? If you factor in what the experts are saying, you probably shouldn’t. The data shows prices are increasing in much of the country, not decreasing. And the latest data from the Home Price Expectation Survey indicates that experts project home prices will rise steadily and return to more normal levels of appreciation after 2023. The best way to understand what home values are doing in your area is to work with a local real estate professional who can give you the latest insights and expert advice.

Bottom Line

If you’re waiting to buy a home until prices come down, you may want to reconsider. Let’s connect to make sure you understand what’s happening in our local housing market.

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