Why the Housing Market Won’t Crash

In the ever-evolving landscape of real estate, fears of a housing market crash often resurface, especially when economic uncertainties loom. However, current indicators suggest that such fears may be unfounded. Here’s why the housing market is poised for stability, if not continued growth. 1. Demand for Homes Is Higher than Supply One of the most compelling reasons why the housing market won't crash is the simple principle of supply and demand. Demand for homes is significantly higher than the available supply. This imbalance has been a consistent trend over recent years and shows no signs of abating. For buyers, this means that competition remains fierce, often leading to bidding wars and homes selling above asking prices. While this scenario can be frustrating for those looking to purchase a home, it serves as a robust indicator that the market is far from collapsing. On the flip side, sellers find themselves in an advantageous position. With more buyers than available homes, properties are moving quickly and often at favorable prices for sellers. This seller's market is driven by various factors, including low mortgage rates and changing lifestyle needs—such as remote work—prompting many to seek new living arrangements. For sellers contemplating listing their homes, now continues to be an opportune time. 2. Unemployment Is Still Low Another critical factor supporting a stable housing market is low unemployment rates. Despite economic challenges brought on by global events like the COVID-19 pandemic, unemployment rates have remained relatively low compared to historical standards. Low unemployment means more people have steady incomes, making them more likely to invest in real estate. Job security fosters consumer confidence, which in turn supports robust housing demand. Real estate news consistently highlights these trends. Reports indicate that while there might be regional fluctuations and occasional slowdowns in certain markets, the overall trajectory remains positive. Analysts frequently point out that today's lending practices are much more stringent compared to those preceding the 2008 financial crisis. Stricter lending criteria mean fewer high-risk loans are being issued, reducing the likelihood of widespread defaults that could trigger a market collapse. Moreover, demographic trends also play a significant role in sustaining demand for housing. Millennials—the largest generation in U.S. history—are now entering their prime home-buying years. This influx of first-time homebuyers adds another layer of demand to an already competitive market. Combine this with sellers being "locked in" to the low rates results in a lower supply. What does high demand and low supply do to the market? Prices increase. It's also worth noting that real estate has historically been one of the most resilient asset classes during economic downturns. Unlike stocks or other investments that can fluctuate wildly based on investor sentiment or global events, real estate tends to hold its value better over time. This resilience makes it an attractive option for both individual buyers and institutional investors alike. In conclusion, while no one can predict the future with absolute certainty, multiple indicators suggest that the housing market is not on the brink of crashing. The persistent demand for homes outstripping supply and low unemployment rates create a solid foundation for ongoing stability. Whether you're a buyer navigating competitive waters or a seller considering capitalizing on current conditions, understanding these dynamics can help you make informed decisions in today’s real estate landscape. Stay tuned to real estate news and keep an eye on local market conditions to ensure you’re making the best choices for your unique situation. The sky isn't falling—in fact, it seems quite stable up there. Questions? Comments? Don't hesitate to reach out to chat about how this impacts our local real estate market.

Buying More House Than You Can Afford

The Biggest Mistakes Buyers Are Making Today Buyers face challenges in any market – and today’s is no different. With higher mortgage rates and rising prices, plus the limited supply of homes for sale, there’s a lot to consider. But, there's one way to avoid getting tripped up – and that’s leaning on a real estate agent for the best possible advice. An expert’s insights will help you avoid some of the most common mistakes homebuyers are making right now. Putting Off Pre-approval As part of the homebuying process, a lender will look at your finances to figure out what they’re willing to loan you for your mortgage. This gives you a good idea of what you can borrow so you can really wrap your head around the financial side of things before you start looking at homes. While house hunting can be a lot more fun than talking about finances, you don’t want to do this out of order. Make sure you get your pre-approval first. As CNET explains: “If you wait to get preapproved until the last minute, you might be scrambling to contact a lender and miss the opportunity to put a bid on a home.” Holding Out for Perfection While you may have a long list of must-haves and nice-to-haves, you need to be realistic about your home search. Even though your ideal state is you find a home that checks every box, you may need to be willing to compromise – especially since inventory is still low. Plus, a home that has everything you want may be too pricey. As Investopedia puts it: “When you expect to find the perfect home, you could prolong the homebuying process by holding out for something better. Or you could end up paying more for a home just because it meets all your needs.” Instead, look for something that has most of your must-haves and good bones where you can add anything else you may need down the line. Buying More House Than You Can Afford With today’s mortgage rates and home prices, there’s no arguing it’s expensive to buy a home. And while it may be tempting to stretch your finances a bit further than you’re comfortable with to make sure you get the house, you want to avoid overextending your budget. Make sure you talk to your agent about how changing mortgage rates impact your monthly payment. Bankrate offers this advice: “Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan doesn’t mean you can comfortably handle the monthly payments that come with it along with your other financial obligations. Every borrower’s case is different, so factor in your whole financial profile when determining how much house you can afford.” Not Working with a Local Real Estate Agent This last one may be the most important of all. Buying a home is a process that involves a lot of steps, paperwork, negotiation, and more. Rather than take all of this on yourself, it’s a good idea to have a pro working with you. The right agent will reduce your stress and help the process go smoothly. As CNET explains: “Attempting to buy a home without a real estate agent makes the process more arduous than it needs to be. A real estate agent can give you professional legal guidance, market expertise and support, which will save you time, money and stress. They can also increase your chances of finding the right home so you don’t have to spend hours scouring the internet for listings.”   Bottom Line Mistakes can cost you time, frustration, and money. If you want to buy a home in today’s market, let’s connect so you have a pro on your side who can help you avoid these missteps.

What Is Going on with Mortgage Rates?

What Is Going on with Mortgage Rates? You may have heard mortgage rates are going to stay a bit higher for longer than originally expected. And if you’re wondering why, the answer lies in the latest economic data. Here’s a quick overview of what’s happening with mortgage rates and what experts say is ahead. Economic Factors That Impact Mortgage Rates When it comes to mortgage rates, things like the job market, the pace of inflation, consumer spending, geopolitical uncertainty, and more all have an impact. Another factor at play is the Federal Reserve (the Fed) and its decisions on monetary policy. And that’s what you may be hearing a lot about right now. Here’s why. The Fed decided to start raising the Federal Funds Rate to try to slow down the economy (and inflation) in early 2022. That rate impacts how much it costs banks to borrow money from each other. It doesn't determine mortgage rates, but mortgage rates do respond when this happens. And that’s when mortgage rates started to really climb. And while there’s been a ton of headway seeing inflation come down since then, it still isn’t back to where the Fed wants it to be (2%). The graph below shows inflation since the spike in early 2022, and where we are now compared to their target rate:   As the graph shows, we’re much closer to their goal of 2% inflation than we were in 2022 – but we’re not there yet. It's even inched up a hair over the last 3 months – and that’s having an impact on the Fed’s plans. As Sam Khater, Chief Economist at Freddie Mac, explains: “Strong incoming economic and inflation data has caused the market to re-evaluate the path of monetary policy, leading to higher mortgage rates.” Basically, long story short, inflation and its impact on the broader economy are going to be key moving forward. As Greg McBride, Chief Financial Analyst at Bankrate, says: “It’s the longer-term outlook for economic growth and inflation that have the greatest bearing on the level and direction of mortgage rates. Inflation, inflation, inflation — that’s really the hub on the wheel.” When Will Mortgage Rates Come Down? Based on current market data, experts think inflation will be more under control and we still may see the Fed lower the Federal Funds Rate this year. It’ll just be later than originally expected. As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), said in response to the Federal Open Market Committee (FOMC) decision yesterday: “The FOMC did not change the federal funds target at its May meeting, as incoming data regarding the strength of the economy and stubbornly high inflation have resulted in a shift in the timing of a first rate cut. We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted.” In the simplest sense, what this says is that mortgage rates should still come down later this year. But timing can shift as new employment and economic data come in, geopolitical uncertainty remains, and more. This is one of the reasons it’s usually not a good strategy to try to time the market. An article in Bankrate gives buyers this advice: “ . . . trying to time the market is generally a bad idea. If buying a house is the right move for you now, don’t stress about trends or economic outlooks.” Bottom Line If you have questions about what’s happening in the housing market and what that means for you, let’s connect.

Should I Wait for Mortgage Rates To Come Down Before I Move?

Should I Wait for Mortgage Rates To Come Down Before I Move? If you’ve got a move on your mind, you may be wondering whether you should wait to sell until mortgage rates come down before you spring into action. Here’s some information that could help answer that question for you. In the housing market, there’s a longstanding relationship between mortgage rates and buyer demand. Typically, the higher rates are, you’ll see lower buyer demand. That’s because some people who want to move will be hesitant to take on a higher mortgage rate for their next home. So, they decide to wait it out and put their plans on hold. But when rates start to come down, things change. It goes from limited or weak demand to good or strong demand. That’s because a big portion of the buyers who sat on the sidelines when rates were higher are going to jump back in and make their moves happen. The graph below helps give you a visual of how this relationship works and where we are today:     As Lisa Sturtevant, Chief Economist for Bright MLS, explains: “The higher rates we’re seeing now [are likely] going to lead more prospective buyers to sit out the market and wait for rates to come down.” Why You Might Not Want To Wait If you’re asking yourself: what does this mean for my move? Here’s the golden nugget. According to experts, mortgage rates are still projected to come down this year, just a bit later than they originally thought.  When rates come down, more people are going to get back into the market. And that means you’ll have a lot more competition from other buyers when you go to purchase your next home. That may make your move more stressful if you wait because greater demand could lead to an increase in multiple offer scenarios and prices rising faster. But if you’re ready and able to sell now, it may be worth it to get ahead of that. You have the chance to move before the competition increases. Bottom Line If you’re thinking about whether you should wait for rates to come down before you move, don’t forget to factor in buyer demand. Once rates decline, competition will go up even more. If you want to get ahead of that and sell now, let’s chat.