Date Archives: November 2022

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Buying | 29 Posts
Real Estate News | 12 Posts
Selling | 14 Posts
November
30

Whenever there's a news segment about the housing market, we hear about the affordability challenges buyers face today. Those headlines are focused on how much mortgage rates have climbed this year. And while it's true that rates have risen dramatically, it's important to remember they aren't the only factor in the affordability equation.  

Here are three measures used to establish home affordability: home pricesmortgage rates, and wages. Let's look closely at each one.  

1. Mortgage Rates

This is the factor most people are focused on when they talk about homebuying conditions today. So far, current rates are almost four full percentage points higher than they were at the beginning of the year. As Len Kiefer, Deputy Chief Economist at Freddie Mac, explains:  

"U.S. 30-year fixed mortgage rates have increased 3.83 percentage points since the end of last year. That's the biggest year-to-date increase in rates in over 50 years."  

That increase in mortgage rates is impacting how much it costs to finance a home purchase, creating a challenge for many buyers that's pricing some out of the market. While the current global uncertainty makes it difficult to project where mortgage rates will go in the future, experts do say that rates will likely remain high as long as inflation does.

2. Home Prices

The second factor at play is home prices. Home prices have made headlines over the past few years because they skyrocketed during the pandemic. Now, the most recent Home Price Index from S&P Case-Shiller shows home values continued to decelerate for a fifth consecutive month (shown in green in the graph below):

This deceleration is happening because higher mortgage rates are moderating demand and, as a result, easing buyer competition and bidding wars that previously drove prices up.

What's worth noting though, is how much higher home prices still are than they were before the pandemic (shown in blue in the graph above). Even now, we have a long way to go to get to more normal levels of home price appreciation, which is historically closer to 4%. When both mortgage rates and home prices are high, affordability and your purchasing power become a greater challenge.  

But while prices are still elevated in many markets, some areas are seeing slight declines. It all depends on your local market. For insight into what's happening in your area, reach out to a trusted real estate professional.

3. Wages

The one big, positive component in the affordability equation is the increase in American wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception.

As the Bureau of Labor Statistics (BLS) reports:  

"Median weekly earnings of the nation's 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier

So, when you think about affordability, remember the full picture includes more than just mortgage rates. Home prices and wages need to be factored in as well. Because wages have been rising, they're a big reason why serious buyers are still purchasing homes this year.  

If you have questions or want to learn more, reach out to a trusted advisor who can explain how all of these variables work together and what's happening in your area. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:  

"Buying or selling a home involves a series of requirements and variables, and it's important to have someone in your corner from start to finish to make the process as smooth as possible… and objectivity to deliver trusted expertise to consumers in every U.S. ZIP code."

To learn more, let's connect today and make sure you have a trusted lender, so you're able to make an informed decision if you're planning to buy or sell a home right now. Call Gambino Realtors at 815.282.2222

November
23

As you look ahead to the winter season, you're likely making plans and thinking about what you want to achieve before the year ends. One of those key decision points could be whether or not you want to sell your home this year. If the location or size of your current home no longer meets your needs, finding a house that better suits your lifestyle may be your top priority. But with today's cooling housing market, is it really a good time to sell your house, or should you wait?

If you're ready to make your decision, here are three reasons you may want to consider selling before the end of the year.  

Get One Step Ahead of Other Sellers  

Typically, in the residential real estate market, homeowners are less likely to list their houses toward the end of the year. That's because people get busy around the holidays and deprioritize selling their house until the start of the new year when their schedules and social calendars calm down.  

Selling now, while other homeowners may hold off until after the holidays, can help your house stand out. Start the process with a real estate professional today so you can get your house on the market and get ahead of your competition.  

Get in Front of Serious Buyers This Season  

Even though housing supply has increased this year as buyer demand has moderated, it's still low overall. That means there aren't enough homes on the market today, especially as the millennial generation reaches their peak homebuying years. As Mark Fleming, Chief Economist at First Americansays:  

"While not the frenzy of 2021, the largest living generation, the Millennials, will continue to age into their prime home-buying years, creating a demographic tailwind for the housing market."  

Serious buyers will still be looking this winter, and your house may be exactly what they're searching for. If you work with an agent to list your house now, you'll be able to get in front of eager buyers who are hoping to make a move before the year ends.  

Seize a Great Chance To Move Up

Don't forget today's homeowners have record amounts of equity. According to CoreLogic, the average amount of equity per mortgage holder has climbed to almost $300,000. That's an all-time high. That means the equity you have in your house right now could cover some, if not all, of a down payment on the home of your dreams.  

And as you weigh the reasons to sell before winter, don't lose sight of why you're thinking about moving in the first place. Maybe it's time to buy a house in a better location for you, has the space you and your loved ones have been craving, or simply gives you that sense of home. A trusted real estate advisor can help you determine how much home equity you have and how you can use it to achieve your goal of making a move.  

If you're considering selling your house so you can find a home that suits your needs, don't delay your plans. Let's connect so you can accomplish your goals before winter. Call Gambino Realtors at 815.282.2222.

November
16

As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start.

If that sounds like you, your down payment could be more in reach than you originally thought. Here's why.

The 20% Down Payment Myth

If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains

". . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership."

Unless it's specified by your loan type or lender, it's typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn't been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.

This is good news for you because it means you could be closer to your homebuying dream than you realize. For more information, turn to a trusted lender.

Down Payment Assistance Programs Can Be a Game Changer

A professional will be able to show you other options that could help you get closer to your down payment goal. According to latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments.

A recent article explains why programs like these are helpful:

"These resources can immediately build your home buying power and help you take action sooner than you thought possible." 

And if you're wondering if you have to be a first-time buyer to qualify for these programs, that's not always the case. According to an article from downpaymentresource.com

"It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement."

There are also location and profession-based programs you could qualify for as well.

Saving for your down payment is an important first step on your homebuying journey. Let's connect today and make sure you have a trusted lender to help explore your options.

 

November
9

The historically low inventory over the past few years led to challenges for many buyers trying to find a home that met their needs and their budget. If you're in the same boat, you should know the recent shift in the housing market may have opened up doors for you to restart your search. 

The inventory of homes for sale has increased this year, and that's giving buyers much needed options. As Danielle Hale, Chief Economist at realtor.comsays

". . . today's shoppers have more than 5 homes to consider for every 4 they had at this time a year ago." 

But perspective is important. Overall, housing supply is still low. If you need even more choices, expanding your search by adding additional housing types, like condominiums, could help.

Exploring Condos Could Add Options That Fit Your Budget

One thing to consider is condos generally differ from single-family homes in average space and floorplans. But that size difference is one reason why condos can be a more affordable option. According to a recent report from realtor.com, condo buyers paid roughly 7% less for their home than buyers of other housing types last year. With rising mortgage rates and home prices, the relative affordability of a condo could be worth considering. 

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. Buying a condo now can springboard you into a bigger home later on. An article from the Urban Institute explains: 

"Because condos and co-ops are generally more affordable, they tend to help first-time homebuyers step onto the first rung of the homeownership ladder. These buyers often use the equity on their condo to then purchase a larger single-family home." 

In other words, owning a condo will help you start building wealth in the form of home equity. In time, the equity you build can fuel a future purchase should you decide you want to buy a home with more space or different amenities.

Condo Living Provides Several Great Perks

Boosting the number of options in your budget during your home search is just one reason to consider condos, but there are several other benefits to condo living.

First, they tend to require minimal upkeep and lower maintenance – and that can give you more time to spend doing the things you enjoy. A recent article from Bankrate highlights this, saying:

"Condos can be a good option for anyone who wants to keep home maintenance to a minimum . . . if the roof is leaking or the carpet in the lobby needs to be replaced, that's not your responsibility — the condo association handles those duties."

 Plus, since many condos are located in or near city centers, they offer the added benefit of being in close proximity to work and leisure. Again, realtor.com explains

"Buying a condo, which is generally less expensive than a single-family home, enables a household to afford to own in the middle of it all, and often means a newer-built home with less maintenance responsibility."

 Ultimately, owning and living in a condo can be a lifestyle choice. And if that appeals to you, they could give you the added options you need to buy your first home. 

Adding condominiums to your housing search could be a great move. If you're ready to search condos in our area, let's connect today. Contact Gambino Realtors at 815.282.2222.

 

November
2

Mortgage rates have increased significantly in recent weeks. And that may mean you have questions about what this means for you if you're planning to buy a home. Here's some information that can help you make an informed decision when you set your homebuying plans. 

As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here's how it works. 

Let's assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is $389,500). If you're trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here's how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

 

As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That's why it's important to work with a real estate advisor to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts.

Are Mortgage Rates Going To Go Down?

The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says this about where rates could go from here:

"Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that's pushing mortgage rates through the roof. And the already high rates are just going to get higher." 

So, if you're waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get inflation under control.

And if you're considering renting as your alternative while you wait it out, remember that's going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

"There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades."

Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you're going to be paying more. The difference is, with homeownership, you're also gaining equity over time which will help grow your net worth

The question now becomes: what makes more sense for you?