By Meera Pal | Jun 27, 2023
Warm weather usually brings out the barbecues, beach trips, and homebuyers in droves. But for this particular home shopping season, many buyers might feel like they’re on the fence.
Homebuyer ambivalence is high for good reason: On the one hand, buyers might be encouraged to hear that last year’s red-hot seller’s market, with its bidding wars and over-asking offers, has finally ebbed. On the other hand, mortgage rates are a full percentage point higher than last year, eating up potential savings. Combined with a bumpy economic forecast, it’s understandable that some homebuyers are hesitant to forge ahead.
“Currently, there are fewer buyers in the market because of rising interest rates and uncertainty in the market,” confirms Ralph DiBugnara, mortgage banker, real estate investor, and president of Home Qualified in New York City. Nonetheless, he points out that conditions have been improving for buyers, so right now is actually “a better time to buy than the [first half] of 2023.” Realtor.com® chief economist Danielle Hale agrees with this assessment, saying that while it’s by no means a buyer’s market, the state of real estate has shifted to a more “buyer-friendly direction.” Reasons to buy a house now Ultimately, whether now is the right time for you to buy a home will boil down to a number of economic and personal factors. If you need help deciding, here are some reasons why it makes sense to buy a house now.
1. There are more homes for sale
Just a year earlier, the supply of housing was at such record lows that competition for the few houses out there was brutal. Since then, housing inventory has grown, with 50% more homes on the market today. Even better, the supply of homes for sale tends to hit its seasonal high point in May.
“Spring is typically the peak season for new listings, meaning there will be a larger selection of homes,” says Martin Boonzaayer, CEO of The Trusted Home Buyer in Phoenix. “This can increase the chances of finding a home that meets your needs and preferences.”
Keep in mind that while inventory is higher than last year, it’s still far below pre-COVID-19 levels, and many of these listings are stale, with fewer new sellers coming on the market.
The reason: According to a recent Realtor.com survey, 82% of potential home sellers feel “locked in” their current home due to a low mortgage rate. Nonetheless, with plenty of homes for sale compared with a year earlier, buyers should have a relatively better shopping experience, particularly if they are willing to overlook a few flaws and drive a hard bargain.
2. Home prices may be heading south soon
Listing prices reached a record high of $449,000 last June, and while they’re still higher now than they were a year earlier, these numbers are poised to decline soon. “The increase in inventory has been big enough to slow home price increases,” says Hale. Plus, buyers should take heart that listing prices are just a starting point, and sellers are willing to settle for less these days. In fact, the final sales price of homes has already declined annually in both March and April.
“Overall, home prices are trending lower,” agrees Rick Arvielo, co-founder and CEO of New American Funding, a privately owned mortgage company. “After the unprecedented increases in home pricing over the last two years, we are seeing the froth coming off some markets that saw home prices increase significantly. This is very market-specific, but for the most part, reasonable reductions are trending.”
Even lowballing, which would have been laughable a year earlier, could work with motivated sellers whose properties have been stuck on the market for a while, so make sure to check a home’s days on the market and negotiate accordingly.
3. Interest rates are poised to decline this year, too
Given the U.S. Federal Reserve isn’t expected to announce another significant interest rate hike anytime soon, many experts say that mortgage rates, like home prices, have likely reached their apex. So buyers should not worry too much that rates will rise higher.
“We’ve seen the highest mortgage rates we are likely to see for some time,” says Hale, who expects mortgage rates to stabilize in the short term, and then begin dropping by late summer and early fall. “I don’t think we’ll see a fast decline from here, but rather a gradual easing.”
“Mortgage interest rates are expected to hover at around 6% for 2023,” says Nick Ron, founder and CEO of House Buyers of America. That’s unless something dramatic happens with either inflation or the job market.
“When you consider that rates reached 16.63% in 1981, our current rates do not look bad,” adds Ron. “And if rates do fall several points, you can refinance.”
Eminlee Wang, a real estate agent with FlyHomes in Dallas, predicts that rates should stick somewhere between 6% and 7%, adding that many mortgage companies are making it easier to refinance in the future if and when rates drop.
“Many mortgage companies are meeting the moment with products that allow their customers to buy now and then refinance for free in the future,” she says. Consumers should always do their research and make sure there are no hidden fees or timeline requirements to those refinancing deals, she advises.
4. Homes are taking longer to sell
In the past few years, homes in hot markets were selling so fast, buyers couldn’t even see the place before it was snapped up.
“During the pandemic, nearly one-third of new listings went into contract within hours or days,” recalls Wang.
But this whiplash pace has slowed considerably. In April 2022, homes spent 49 days on the market, which is 17 days longer than last year.
The reason for this slowdown: Everyone is waiting and hoping for either interest rates to drop or home prices to go down.
“This has meant that the limited number of homes which are on the market are sitting for longer,” says Wang.
This means buyers need no longer rush into a deal out of desperation, but can take their time to compare their options and negotiate a better deal.
“Buyers are more in the driver’s seat than they were just 12 to 18 months ago,” says Ron. “Demand is not what it was, so sellers are more likely to be flexible.”
5. It’s the right time for you and your family
Sometimes, the reasons you’re buying a house are out of your control. Perhaps you’re moving due to a job change or other extenuating circumstances. So while interest rates and high home prices are challenging affordability for many potential homebuyers, it’s important not to try too hard to time the market and let it dictate what you do, especially if moving makes sense for your life right now.
“The best time to buy or sell is specific to you and your needs,” says Ashley Farrell, a real estate agent with The Corcoran Group in Westhampton Beach, NY. “Evaluate your life and the trajectory of your next few chapters. For naysayers on high mortgage rates, those are temporary. Date the rate, and marry the house!”
“A good real estate agent and lender can help you figure out a strategy to lower your interest rate,” says Delaney Juarez, a real estate agent with Keller Williams City View in San Antonio, TX. “So don’t let that be a reason you put off a move that you really want or need to make.”
Reasons to hold off on buying a house While there are some good reasons to jump into the housing market right now, there are also a few things to consider that might mean you’re better off waiting to buy a house.
1. You’re maxing out your budget
Inflation was still up 4.9% year over year in April, eating into homebuyers’ budgets. So if mortgage rates have you stretched thin financially, then it might be best to wait and allow mortgage rates to steady or even come down before buying a house. “If interest rates have risen to a level that would strain your budget and make homeownership unaffordable, it might be wise to wait until rates become more favorable or until you can improve your financial situation,” says Chase Michels, real estate agent with The Michels Group Compass in Downers Grove, IL. Since interest rates change so often, potential homebuyers can and should rate-test their budgets regularly by plugging their income and debts into an online home affordability calculator.
2. Your future is uncertain
The country is sitting in a relatively unpredictable economic situation at the moment, so if your own future is unclear and you don’t have to move, waiting might be the safer option—especially if you aren’t settled in your job or sure you plan to live in an area for more than a year or two. “If you have the flexibility to wait and are not in immediate need of a home, you can take the time to save more money for a larger down payment, improve your credit score, or explore other neighborhoods or housing options that may become available in the future,” Michels says.
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