Mortgage rates topped 6% last week, Bankrate data showed, with some pros saying they could rise. (You can see the lowest mortgage rates you could qualify for here.) On top of that, home prices have risen more than 20% year-over-year, raising financial concerns. affordability for many potential buyers. And that probably leads them to wonder: what do I need to know if I want to buy a house now? So, as part of our series where we ask leading real estate professionals what they think of the housing market, we spoke with Steve Reich. He is the chief operating officer of Finance of America Mortgage, a home finance company that claims to have funded more than $105 billion in consumer loans since 2015, which has two decades of mortgage processing experience. , subscription and more. Here are his thoughts on the housing market now.
Affordability challenges are very real right now
“We saw home price appreciation cool off a bit at the end of last year, but in the first half of 2022 we saw further acceleration, with home prices jumping almost 20% d ‘year to year from February,’ says Reich. Experts (like Redfin Chief Economist Daryl Fairweather, whom we also interviewed for this series) have noted that we are likely reaching a point where this kind of growth can no longer be sustainable, and if so, we may expect house price appreciation to slow later this year. “Either way, in the short term, higher home price appreciation will have a significant impact on how many families can afford to buy or be squeezed out of the market,” Reich said.
Another thing to keep in mind is that rising rates can add more complications to the issue of affordability. “On the one hand, I think fear of missing out on low rates has contributed to some of the price spikes we’re seeing as potential buyers rush to snap up a home and get into bidding wars. . In the long run though, higher rates will frustrate some buyers and eventually dampen demand,” Reich says. (You can see the lowest mortgage rates you could qualify for here.)
Homeowners may be hesitant to sell their home, which can worsen an already tight housing inventory
The housing stock is still at an all-time high. We’re in “prime housing season, when more families tend to put their homes on the market and prepare to move in the summer after the school year,” Reich notes. But, he adds, “there is uncertainty about how much stock will be available. Indeed, “for some homeowners who have locked in rates in the low 2% or 3% range, they may be hesitant to sell their home and look to buy a new home knowing they will be paying more in interest rates now. “, says Reich. .
On the new home construction side, while it is unclear what the full effects of prolonged inflation will be on the availability of new units in the future, the residual impact of supply chain issues, labor shortages and rising fuel prices will likely continue to impact news – home construction costs, staffing and other areas of the housing and real estate landscape, according to Reich.
To compete in this tough market, you may need a competitive offer
Given these factors, buyers should be aware that in order to compete in the current market environment and get your offer accepted, you may need a strong offer. “You may need to get creative: consider limiting contingencies in your offer if possible and don’t ask for too many credits. Show sellers that you can be more flexible on deadlines, for example, offer to close faster or even let the seller do a sale-leaseback if they need more time to move or find another home” , explains Reich. Having a pre-approval letter in hand, a higher down payment, and an initial subscription can strengthen your offer financially and make you a more compelling buyer.
That said, the competitiveness of an offer varies from market to market (and of course from house to house) – some markets being much more and less competitive than others. Indeed, Redfin’s Fairweather recently told MarketWatch Picks that we’re seeing early signs that the housing market is starting to cool, at least in expensive coastal metros. “Buyers in markets like Los Angeles, San Francisco, Boston and Seattle who have lost multiple bidding wars may find that they face less competition from other buyers than they did a month or two,” says Fairweather.
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