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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.

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Your Tax Refund Can Help You Achieve Your Homebuying Goals

Have you been saving up to buy a home this year? If so, you know there are a variety of expenses involved – from your down payment to closing costs. But there’s good news – your tax refund can help you achieve your goals by paying for some of these expenses.

SmartAsset estimates the average American will receive a $1,798 tax refund this year. The map below provides a more detailed estimate by state:

According to Freddie Mac, there are multiple ways your refund check can help you as a homebuyer. If you’re getting a refund this year and thinking about buying a home, here are a few tips to keep:

  • Saving for a down payment – One of the largest barriers to homeownership is saving for a down payment. You could reach your savings goal more quickly than expected by using your tax refund to help with your down payment.
  • Paying for closing costs – You have to pay fees to your lender, real estate agent, and other parties involved in the homebuying transaction before you can officially take ownership of your home. You could direct your tax refund toward these closing costs.
  • Lowering your interest rate – Your lender might give you the option to buy down your mortgage interest rate during the homebuying process. That means, you could pay upfront to have a lower interest rate on your fixed-rate mortgage.

The best way to prepare to buy a home is to work with a trusted real estate professional who understands the process. They’ll help you navigate the costs you may encounter as you begin your homebuying journey.

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Trying To Buy a Home? Hang in There.

We’re still in a sellers’ market. And if you’re looking to buy a home, that means you’re likely facing some unique challenges, like difficulty finding a home and volatile mortgage rates. But keep in mind, there are some benefits to being a buyer in today’s market that give you good reason to stick with your search. Here are a few of them.

Long-Term Benefits Outweigh Short-Term Challenges

Owning a home grows your net worth – and since building that wealth takes time, it makes sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity. Freddie Mac puts it this way:

“Homeownership not only builds a sense of pride and accomplishment, but it’s also an important step toward achieving long-term financial stability.”

The key there is long-term because the financial benefits homeownership provides, like home value appreciation and equity, grow over time. Those benefits are worth the short-term challenges today’s sellers’ market presents.

Mortgage Rates Are Constantly Changing

Mortgage rates have been hovering around 6.5% over the last several months. However, as Sam Khater, Chief Economist at Freddie Mac, notes, they’ve been coming down some recently:

“Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market . . .”

Lower mortgage rates improve your purchasing power when you buy, and that can help make homeownership more affordable. Hannah Jones, Economic Data Analyst at realtor.com, explains:

“As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”

The recent drop in mortgage rates is good news if you couldn’t afford to buy a home when they peaked.

Home Prices Will Increase

According to the Home Price Expectation Survey, which polls over 100 real estate experts, home values will go up steadily over the next few years after a slight decline this year (see graph below):

Rising home prices in the coming years means two things for you as a buyer:

  • Waiting to buy a home could mean it’ll become more expensive to do so.
  • Buying now means the value of your home, and your net worth, will likely grow over time.
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How Homeownership Is Life Changing for Many Women

Throughout Women’s History Month, we reflect on the impact women have in our lives, and that includes impact on the housing market. In fact, since at least 1981, single women have bought more homes than single men each year, and they make up 17% of all households.

Why Is Homeownership So Important to Women?

The rise in women pursuing homeownership hasn’t just made an impact on the housing market. It’s also been an asset for those buyers and their households. That’s because homeownership has many benefits, both financial and personal.

On the financial side, housing proves to be the key to building wealth for single women. Ksenia Potapov, Economist at First American, says:

“For single women, housing has always made up a large share of total assets. Over the last 30 years, the average single woman’s wealth has increased 88% on an inflation-adjusted basis, from just over $142,000 in 1989 to $267,000 in 2019, and housing has remained the single largest component of their wealth.”

The financial security and independence homeownership provides can be life changing, too. And when you factor in the personal motivations behind buying a home, that impact becomes even clearer.

A recent report from the National Association of Realtors (NAR) shares the top reasons single women are buying a home right now (see chart below):

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Why Buying a Home Is a Sound Decision

If you’re thinking about buying a home, you want to know the decision will be a good one. And for many, that means thinking about what home prices are projected to do in the coming years and how that could impact your investment.

This year, we aren’t seeing home prices fall dramatically. As the year goes on, however, some markets may go up in value while others may lose value. That’s why it’s helpful to keep the long-term view in mind. Experts project a return to a steadier rate of price appreciation in the years that follow.

Home Price Appreciation in the Years Ahead

Over 100 economists, investment strategists, and housing market analysts were polled by Pulsenomics in their latest quarterly Home Price Expectation Survey (HPES). The report indicates what they believe will happen with home prices over the next five years. As the graph below shows, after mild depreciation this year, these experts forecast home prices will return to more normal levels of appreciation through 2027.

The big takeaway is experts aren’t forecasting a drastic fall in home prices nationally, even though some markets will see home price appreciation while others may depreciate. And when they look further out, they see steady price appreciation in the long run. That’s a great example of why homeownership wins over time.

What Does This Mean for You?

Once you buy a home, price appreciation raises your home’s value, and that grows your household wealth. Here’s how a typical home’s value could change over the next few years using the expert price appreciation projections from the survey mentioned above (see graph below):

In this example, if you bought a $400,000 home at the beginning of this year and factor in the forecast from the HPES, you could accumulate over $54,000 in household wealth over the next five years. So, if you’re wondering if buying a home is a sound decision, keep in mind what a strong wealth-building tool it is long term.

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Reasons To Consider Condos in Your Home Search

Are you having trouble finding a home that fits your needs and your budget? If so, you should know there’s an option worth considering – condominiums, also known as condos. According to Bankrate:

A condo can be a more affordable entry point to homeownership than a single-family home. And as a homeowner, you’ll build equity over time and have access to tax benefits that a renter wouldn’t.”

That’s why expanding your search to include additional housing types, like condominiums, could help you accomplish your homeownership goals this spring, especially if you can be flexible about the space you need. Condos are typically smaller than a single-family home, but that’s part of what can make them more budget-friendly (see graph below):

In addition to providing more options in your home search and possibly your price point, there are several other benefits to condo living. They tend to require less upkeep and lower maintenance – and that can give you more time to spend doing the things you enjoy. Plus, since many condos are in or near city centers, they offer the added benefit of being in close proximity to work and leisure.

Remember, your first home doesn’t have to be your forever home. The important thing is to get your foot in the door as a homeowner so you can start building wealth in the form of home equity. In time, the equity you develop can fuel a future purchase if your needs change.

Ultimately, owning and living in a condo can be a lifestyle choice. And if that appeals to you, they could provide the added options you need in today’s market.

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What’s Ahead for Home Prices in 2023

Over the past year, home prices have been a widely debated topic. Some have said we’ll see a massive drop in prices and that this could be a repeat of 2008 – which hasn’t happened. Others have forecasted a real estate market that could see slight appreciation or depreciation depending on the area of the country. And as we get closer to the spring real estate market, experts are continuing to forecast what they believe will happen with home prices this year and beyond.

Selma Hepp, Chief Economist at CoreLogic, says:

While 2023 kicked off on a more optimistic note for the U.S. housing market, recent mortgage rate volatility highlights how much uncertainty remains. Nevertheless, the continued shortage of for-sale homes is likely to keep price declines modest, which are projected to top out at 3% peak to trough.”

Additionally, every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts regarding their five-year expectations for future home prices in the United States. Here’s what they said most recently:

So, given this information and what experts are saying about home prices, the question you might be asking is: should I buy a home this spring? Here are three reasons you should consider making a move:

  1. Buying a home helps you escape the cycle of rising rents. Over the past several decades, the median price of rent has risen consistently. The bottom line is, rent is going up.
  2. Homeownership is a hedge against inflation. A key advantage of homeownership is that it’s one of the best hedges against inflation. When you buy a home with a fixed-rate mortgage, you secure your housing payment, so it won’t go up like it would if you rent.
  3. Homeownership is a powerful wealth-building tool. The average net worth of a homeowner is $255,000 compared to $6,300 for a renter.

Experts are projecting slight price depreciation in the housing market this year, followed by steady appreciation. Given that, you may be wondering if you should move ahead with buying a home this spring. The decision to purchase a home is best made when you do it knowing all the facts and have an expert on your side.

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Balancing Your Wants and Needs as a Homebuyer This Spring

Though there are more homes for sale now than there were at this time last year, there’s still an undersupply with fewer houses available than in more normal, pre-pandemic years. The Monthly Housing Market Trends Report from realtor.com puts it this way: 

“While the number of homes for sale is increasing, it is still 43.2% lower than it was before the pandemic in 2017 to 2019. This means that there are still fewer homes available to buy on a typical day than there were a few years ago.”

The current housing shortage has an impact on how you search for a home this spring. With limited options on the market, buyers who consider what’s a necessity versus what’s a nice-to-have will be more successful in their home search.

The first step? Get pre-approved for a mortgage. Pre-approval helps you better understand what you can borrow for your home loan, and that plays an important role in how you’ll put your list together. After all, you don’t want to fall in love with a home that’s out of reach. Once you have a good grasp on your budget, the best way to prioritize all the features you want and need in a home is to put together a list.

Here’s a great way to think about them before you begin:

  • Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle.
  • Nice-To-Haves – These are features you’d love to have but can live without. Nice-to-haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of the these, it’s a contender.
  • Dream State – This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner.

Finally, once you’ve created your list and categorized it in a way that works for you, discuss it with your real estate agent. They’ll be able to help you refine the list further, coach you through the best ways to stick to it and find a home in your area that meets your needs.