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Where Are Mortgage Rates Headed?

Author: Jeannine Lemmon
Categories: For Buyers,Housing Market Updates,Interest Rates

There’s never been a truer statement regarding forecasting mortgage rates than the one offered last year by Mark Fleming, Chief Economist at First American:

“You know, the fallacy of economic forecasting is: Don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”

Coming into this year, most experts projected mortgage rates would gradually increase and end 2022 in the high three-percent range. It’s only April, and rates have already blown past those numbers. Freddie Mac announced last week that the 30-year fixed-rate mortgage is already at 4.72%.

Danielle Hale, Chief Economist at realtor.com, tweeted on March 31:

“Continuing on the recent trajectory, would have mortgage rates hitting 5% within a matter of weeks. . . .”

Just five days later, on April 5, the Mortgage News Daily quoted a rate of 5.02%.

No one knows how swiftly mortgage rates will rise moving forward. However, at least to this point, they haven’t significantly impacted purchaser demand. Ali Wolf, Chief Economist at Zonda, explains:

“Mortgage rates jumped much quicker and much higher than even the most aggressive forecasts called for at the end of last year, and yet housing demand appears to be holding steady.”

Through February, home prices, the number of showings, and the number of homes receiving multiple offers all saw a substantial increase. However, much of the spike in mortgage rates occurred in March. We will not know the true impact of the increase in mortgage rates until the March housing numbers become available in early May.

Rick Sharga, EVP of Market Intelligence at ATTOM Data, recently put rising rates into context:

“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach five percent on a 30-year fixed rate loan, more consumers are going to struggle to find a property they can comfortably afford.”

While no one knows exactly where rates are headed, experts do think they’ll continue to rise in the months ahead. In the meantime, if you’re looking to buy a home, know that rising rates do have an impact. As rates rise, it’ll cost you more when you purchase a house. If you’re ready to buy, it may make sense to do so sooner rather than later.

Bottom Line

Mark Fleming got it right. Forecasting mortgage rates is an impossible task. However, it’s probably safe to assume the days of attaining a 3% mortgage rate are over. The question is whether that will soon be true for 4% rates as well.

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Using Your Tax Refund To Achieve Your Homeownership Goals This Year

Author: Jeannine Lemmon
Categories: First Time Home Buyers,For Buyers,For Sellers,Housing Market Updates,Move-Up Buyers

If you’re buying or selling a home this year, you’re likely saving up for a variety of expenses. For buyers, that might include things like your down payment and closing costs. And for sellers, you’re probably working on a bit of spring cleaning and maintenance to spruce up your house before you list it.

Either way, any money you get back from your taxes can help you achieve your goals. Using a tax refund is a common tactic for buyers and sellers. SmartAsset estimates the average American will receive a $2,897 tax refund this year. The map below provides a more detailed estimate by state:

Using Your Tax Refund To Achieve Your Homeownership Goals This Year | Simplifying The Market

If you’re getting a refund this year, here are a few tips to help with your home purchase or sale this season.

How Buyers Can Use Their Tax Refund

According to American Financing, there are multiple ways your refund check can help you as a homebuyer. A few include:

  • Growing your down payment fund – If you haven’t started saving for your down payment, let your tax refund kick off the process. And if you have a fund already, the money you get back could put you closer to your goal.
  • Paying for your home inspection – Your home inspection can save you a lot of headaches down the road by helping you determine the condition of the house. As a buyer, you’ll typically be responsible for paying for your inspection, and it’s definitely worth the investment.
  • Saving for closing costs – Closing costs are additional expenses you’ll need to pay once it’s time to close. They average anywhere between 2-5% of the purchase price of your home.

This list is a great start, but it isn’t exhaustive of all the costs you may encounter as you set out on your homebuying journey. The best way to prepare is to work with a trusted real estate professional to make sure you understand what’s to come in the process.

How Sellers Can Use Their Tax Refund

If you own a home and are planning to sell this spring, your tax refund can help you make sure your home is ready to list. Here are a few ways current homeowners can put their tax refund to good use:

  • Making small upgrades – NerdWallet provides a list of great ways to use your tax refund, including tackling small projects or boosting your curb appeal to help your home stand out.
  • Making repairs – If there’s anything in your house that needs to be fixed, American Financing notes that completing repairs is another great use of that money.
  • Buying your next home – Whether you’re selling to move up or downsize, you can use your tax refund to help pay for any costs on the purchase of your next home.

Of course, it’s important to talk with your trusted real estate advisor before taking on any projects. They’ll make sure you can focus on areas that’ll help you receive the best possible price when you sell.

Bottom Line

Funding your home purchase or sale can feel like a daunting task, but it doesn’t have to be. Your tax refund can help you reach your goals. Let’s connect to discuss how you can start on your journey.

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Do You Know How Much Equity You Have in Your Home? [INFOGRAPHIC]

Author: Jeannine Lemmon
Categories: For Sellers,Housing Market Updates,Infographics,Move-Up Buyers

Do You Know How Much Equity You Have in Your Home? [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • If you’re a homeowner, your net worth has gotten a big boost. That’s because recent home price appreciation has increased your equity.
  • Your equity grows as you pay down your loan and as your home increases in value. Over the past year, the average homeowner’s equity grew by $55,300.
  • Ready to sell? Let’s connect to talk about how you can use that equity to fuel your next move.
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The Future of Home Price Appreciation and What It Means for You

Author: Jeannine Lemmon
Categories: First Time Home Buyers,For Buyers,Housing Market Updates,Move-Up Buyers,Pricing

Many consumers are wondering what will happen with home values over the next few years. Some are concerned that the recent run-up in home prices will lead to a situation similar to the housing crash 15 years ago.

However, experts say the market is totally different today. For example, Odeta Kushi, Deputy Chief Economist at First American, tweeted just last week on this issue:

“. . . We do need price appreciation to slow today (it’s not sustainable over the long run) but high price growth today is supported by fundamentals- short supply, lower rates & demographic demand. And we are in a much different & safer space: better credit quality, low DTI [Debt-To-Income] & tons of equity. Hence, a crash in prices is very unlikely.”

Price appreciation will slow from the double-digit levels the market has seen over the last two years. However, experts believe home values will not depreciate (where a home would lose value).

To this point, Pulsenomics just released the latest Home Price Expectation Survey – a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. It forecasts home prices will continue appreciating over the next five years. Below are the expected year-over-year rates of home price appreciation based on the average of all 100+ projections:

  • 2022: 9%
  • 2023: 4.74%
  • 2024: 3.67%
  • 2025: 3.41%
  • 2026: 3.57%

Those responding to the survey believe home price appreciation will still be relatively high this year (though half of what it was last year), and then return to more normal levels over the next four years.

What Does This Mean for You as a Buyer?

With a limited supply of homes available for sale and both prices and mortgage rates increasing, it can be a challenging market to navigate as a buyer. But buying a home sooner rather than later does have its benefits. If you wait to buy, you’ll pay more in the future. However, if you buy now, you’ll actually be in the position to make future price increases work for you. Once you buy, those rising home prices will help you build your home’s value, and by extension, your own household wealth through home equity.

As an example, let’s assume you purchased a $360,000 home in January of this year (the median price according to the National Association of Realtors rounded up to the nearest $10K). If you factor in the forecast for appreciation from the Home Price Expectation Survey, you could accumulate over $96,000 in household wealth over the next five years (see graph below):

The Future of Home Price Appreciation and What It Means for You | Simplifying The Market

Bottom Line

If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be your best bet for your wallet. It’ll also give you the chance to use the future home price appreciation to build your own net worth through rising equity. If you want to get started, let’s connect today.

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What’s Happening with Mortgage Rates, and Where Will They Go from Here?

Author: Jeannine Lemmon
Categories: For Buyers,Housing Market Updates,Interest Rates,Pricing

Based on the Primary Mortgage Market Survey from Freddie Mac, the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. The rate jumped by more than a quarter of a point from just a week ago. Here’s a visual to show how mortgage rate movement throughout 2021 was steady compared to the rapid increase in mortgage rates this year:

What’s Happening with Mortgage Rates, and Where Will They Go from Here? | Simplifying The Market

Just a few months ago, Freddie Mac projected mortgage rates would average 3.6% in 2022. Earlier this month, Fannie Mae forecast mortgage rates would average 3.8% in 2022. As the chart above shows, rates have already surpassed those projections.

Sam Khater, Chief Economist at Freddie Mac, explained in a press release last week:

“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”

Where Are Mortgage Rates Going from Here?

In a recent article by Bankrate, several industry experts weighed in on where rates might be headed going forward. Here are some of their forecasts:

Greg McBride, Chief Financial Analyst, Bankrate:

“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):

“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”

Len Kiefer, Deputy Chief Economist, Freddie Mac:

“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”

In a recent realtor.com article, another expert adds to the conversation:

Danielle Hale, Chief Economist, realtor.com:

“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”

What Does This Mean for You if You’re Looking To Buy a Home?

With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. That’s because it’ll cost you more the longer you wait. But, there is a possible silver lining to buying a home right now. While you’ll be paying a higher price and a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.

If you purchase a home today valued at $400,000 and put 10% down, you would be taking out a $360,000 mortgage. According to mortgagecalculator.net, at a 4.42% fixed mortgage rate, your mortgage payment would be $1,807 a month (this does not include insurance, taxes, and other fees because those vary by location).

Now, let’s put that mortgage payment into a new perspective based on the substantial growth in equity that comes with the escalation in home prices. Every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts about their expectations for future home prices in the United States. Last week, Pulsenomics released their latest Home Price Expectation Survey. The survey reveals that the average of the experts’ forecasts calls for a 9% increase in home values in 2022.

Based on those projections, a $400,000 house you buy today could be valued at $436,000 by this time next year. If you break that down, that means the equity in your home would increase by $3,000 a month over that period. That’s greater than the estimated monthly payment above. Granted, the increase in your net worth is tied to the home, but it is one way to put the home price appreciation to use in a way that benefits you.

Bottom Line

Paying a higher price for a home and a higher mortgage rate can be a difficult pill to swallow. However, waiting will just cost you more. If you’re ready, willing, and able to buy a home, now will be a better time than a year, or even six months from now. Let’s connect to begin the process today.

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The Best Week To List Your House Is Just Around the Corner

Author: Jeannine Lemmon
Categories: For Sellers,Housing Market Updates

Are you thinking about selling your house? If so, you may want to make it a priority to start the process soon. According to realtor.com, the sweet spot for sellers is just around the corner. In a recent study, experts analyzed housing market trends by looking at data from the past several years (excluding 2020, since it was an atypical year). When applied to the current market, experts determined the ideal week to list a house this year. The research says:

“Home sellers on the fence waiting for that perfect moment to sell should start preparations, because the best time to list a home in 2022 is approaching quickly. The week of April 10-16 is expected to have the ideal balance of housing market conditions that favor home sellers, more so than any other week in the year.”

If you’ve been putting your move on the back burner waiting for the ideal time to sell, you should know your golden window of opportunity is coming up. If you’re able to get your house ready quickly, here’s what you can expect from that week.

You Should See More Buyer Activity

The article expects higher buyer demand based on what’s happened in previous years. This could result in increased competition among buyers and ultimately a bidding war over your house. And since mortgage rates recently ticked up over 4%, chances are good that analysis is right. When rates rise, experts say buyers often hurry to make their purchase before rates climb higher. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

“. . . Buyers are rushing to lock in lower rates as the outlook is for even higher mortgage rates in the following months.”

Your House Is Expected To Sell Quickly

Additionally, the realtor.com analysis shows houses sell even faster during this week of the year, likely due to the heightened buyer demand. If you work with a trusted real estate professional to price your house right, it should sell quickly. And when homes are already selling in just 18 days according to NAR, that could set you up for a big win.

Your House Will Be in the Spotlight

Since the beginning of the year, the number of homes available for sale has been at or near record lows. According to the realtor.com study, the typical trend for this week of the year is that there will be even fewer sellers on the market. If you list when inventory is low, your house will be the center of attention for eager buyers craving options.

If you’re ready to move fast, you may want to shoot for April 10th-16th as your target goal. Just remember, even if you’re not ready to list within the next couple of weeks, rest assured this is still a hot sellers’ market. If you list later in April, you’ll still be in the driver’s seat.

Bottom Line

Ready to get the ball rolling? Let’s connect and schedule a time to go over your next steps. In the meantime, make a checklist of things you need to tackle to get your house ready. When we talk, we can prioritize your to-do list and get you on the road to selling your house.

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A Key To Building Wealth Is Homeownership

Author: Jeannine Lemmon
Categories: First Time Home Buyers,For Buyers,Housing Market Updates,Rent vs. Buy

The link between financial security and homeownership is especially important today as inflation rises.  But many people may not realize just how much owning a home contributes to your overall net worth. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:

“Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”

Here are just a few reasons why, if you’re looking to increase your financial stability, homeownership is a worthwhile goal.

Owning a Home Is a Building Block for Financial Success

A recent NAR report details several homeownership trends and statistics, including the difference in net worth between homeowners and renters. It finds:

“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”

To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter (see visual below):

A Key To Building Wealth Is Homeownership | Simplifying The Market

The results from this report show that owning a home is a key piece to the puzzle when building your overall net worth.

Equity Gains Can Substantially Boost a Homeowner’s Net Worth

The net worth gap between owners and renters exists in large part because homeowners build equity. As a homeowner, your equity grows as your home appreciates in value and you make your mortgage payments each month.

In other words, when you own your home, you have the benefit of your mortgage payment acting as a contribution to a forced savings account. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.

To sum it up, NAR says it simply:

“Homeownership has always been an important way to build wealth.”

Bottom Line

The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building. If you’re ready to start on your journey to homeownership, let’s connect today.

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What You Can Expect from the Spring Housing Market

Author: Jeannine Lemmon
Categories: For Buyers,For Sellers,Housing Market Updates,Interest Rates,Pricing

As the spring housing market kicks off, you likely want to know what you can expect this season when it comes to buying or selling a house. While there are multiple factors causing some uncertainty, including the conflict overseas, rising inflation, and the first rate increase from the Federal Reserve in over three years — the housing market seems to be relatively immune.

Here’s a look at what experts say you can expect this spring.

1. Mortgage Rates Will Climb

Freddie Mac reports the 30-year fixed mortgage rate has increased by more than a full point in the past six months. And despite some mild fluctuation in recent weeks, experts believe rates will continue to edge up over the next 90 days. As Freddie Mac says:

“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year.”

If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.

2. Housing Inventory Will Increase

There may be some relief coming for buyers searching for a home to purchase. Realtor.com recently reported that the number of newly listed homes has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced the months’ supply of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.

If you’re a buyer who has been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right home.

If you’re a seller, listing now instead of waiting for this additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.

3. Home Prices Will Rise

Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong. As realtor.com explains in their most recent Housing Report:

“During the final two weeks of the month, more new sellers entered the market than during the same time last year. . . . However, with 5.8 million new homes missing from the market and millions of millennials at first-time buying ages, housing supply faces a long road to catching up with demand.”

What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.

Won’t Increasing Mortgage Rates Cause Home Prices To Fall?

While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, says:

“What I will caution against is making the inference that interest rates have a direct impact on house prices. That is not true.”

Freddie Mac studied the impact that mortgage rates increasing by at least 1% has had on home prices in the past. Here are the results of that study:

What You Can Expect from the Spring Housing Market | Simplifying The Market

As the chart shows, mortgage rates jumped by at least 1% six times in the last thirty years. In each case, home values increased.

So again, if you’re a first-time buyer or a repeat buyer, waiting to buy likely means you’ll pay more for a home later in the year (as compared to its current value).

Bottom Line

There are three things that seem certain going into the spring housing market:

  1. Mortgage rates will continue to rise
  2. The selection of homes available for sale will modestly improve
  3. Home prices will continue to appreciate, just at a slightly slower pace

If you’re thinking of buying, act now before mortgage rates and home prices increase further. If you’re thinking of selling, your best bet may be to sell soon so you can beat the increase in competition that’s about to come to market.

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What You Need To Know if You’re Thinking About Building a Home

Author: Jeannine Lemmon
Categories: For Buyers,Housing Market Updates,Move-Up Buyers,New Construction

If you’re ready to move up, you may be trying to decide whether you want to buy a home that’s already on the market or build a new one. And since the supply of homes available for sale today is low, you’re willing to consider either avenue. While home builders are doing everything they can to construct more houses and help narrow the supply shortage, they’re also facing delays due to factors outside of their control.

Here’s the latest on some of the key challenges homebuilders are experiencing today and how they could impact your plans to move up. When you know what’s happening in the industry, you can make an informed decision on whether to look for a newly built or an existing home in your home search.

Supply Chain Issues

The first hurdle builders are dealing with is the lack of supply of various building materials. According to a recent article from HousingWire:

“. . . Nearly everything needed in the homebuilding process is facing some sort of delay and subsequent price increase.”

The supply issue isn’t just with lumber, even though that’s what’s covered most in the news. The article explains many other supplies are impacted too, including roofing materials, windows, garage doors, siding, and gypsum (which is used in drywall).

The difficulty in getting these items is dragging out timelines for new homes as builders wait on what they need to finish construction. And since materials are in short supply, even when they do get the product, the principle of supply and demand is driving prices up for those goods. HousingWire explains it like this:

“When supplies are low, charges inevitably go up, . . . Meanwhile, a lack of availability is causing huge delays, meaning builders are struggling to stay on schedule.”

The National Association of Home Builders (NAHB) agrees:

“Builders are grappling with supply-chain issues that are extending construction times and increasing costs.”

Skilled Labor Shortage

But that’s not the only challenge with new home construction today. Builders are also having a hard time finding skilled labor, which means they’re short-handed, further dragging out their timelines. Odeta Kushi, Deputy Chief Economist at First American, says this is an ongoing challenge for the industry:

“The skilled labor shortage in the construction industry is not new – it’s been an issue for more than a decade now.”

But there is good news. The February jobs report shows employment gains in the construction industry. Kushi puts this encouraging news into perspective in the article mentioned above:

“Overall this was a good report, . . . The supply of workers continues to fall short of demand, but the underlying momentum of the labor market recovery is strong, and falling COVID case counts provide further forward momentum.”

That means, while finding workers continues to be a challenge for builders, there are signs of positive momentum moving forward.

How This Impacts You

HousingWire explains how these things can impact move-up buyers today:

“The residential construction industry is facing a crisis as builders manage the critical shortage of building materials and labor. Explosive supply and labor costs are forcing long delays. . . .” 

So, when you weigh your options and try to decide between building a home or buying an existing one, factor the potential delay in new home construction into your decision. While it doesn’t mean you should cross newly built homes off your list, it does mean you should consider your timeline and if you’re willing to wait while your home is being constructed.

Bottom Line

When planning your next move, understanding the latest market conditions is key to making the best decision possible. To make sure you have all the information you need, let’s connect. Together we can make sure you know what’s happening in our local market so you can confidently decide what’s right for you, your priorities, and your timeline.

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The Average Homeowner Gained More Than $55K in Equity over the Past Year

Author: Jeannine Lemmon
Categories: For Sellers,Housing Market Updates,Pricing

If you’re a current homeowner, you should know your net worth just got a big boost. It comes in the form of rising home equity. Equity is the current value of your home minus what you owe on the loan. Today, you’re building that equity far faster than you may expect – and this gain is great news for you.

Here’s how it happened. Home values are on the rise thanks to low housing supply and high buyer demand. Basically, there aren’t enough homes available to meet this high buyer interest,  so bidding wars are driving home prices up. When you own a home, the rising prices mean your home is worth more in today’s market. And as home values climb, your equity does too. As Dr. Frank Nothaft, Chief Economist at CoreLogic, explains:

“Home prices rose 18% during 2021 in the CoreLogic Home Price Index, the largest annual gain recorded in its 45-year history, generating a big increase in home equity wealth.”

The latest Homeowner Equity Insights from CoreLogic shed light on just how much rising home values have boosted homeowner equity. According to that report, the average homeowner’s equity has grown by $55,300 over the last 12 months.

Want to know what’s happening in your area? Here’s a breakdown of the average year-over-year equity growth for each state based on that data.

The Average Homeowner Gained More Than $55K in Equity over the Past Year | Simplifying The Market

How Rising Equity Impacts You

In addition to building your overall net worth, equity can also help you achieve other goals like buying your next home. It works like this: when you sell your house, the equity you built up comes back to you in the sale.

In a market where you’re gaining so much equity, it may be just what you need to cover a large portion – if not all – of the down payment on your next home. So, if you’ve been holding off on selling and worried about being priced out of your next home because of today’s home price appreciation, rest assured your equity can help fuel your move.

Bottom Line

Equity can be a real game-changer if you’re planning to make a move. To find out just how much equity you have in your home and how you can use it to fuel your next purchase, let’s connect so you can get a professional equity assessment report on your house.

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